The Canadian dollar closed lower versus the US dollar on Friday as data showed job growth moderated in Canada in March after two solid months, but the currency still ended the week with a 1.2 percent gain.
Canadian bond prices finished higher across the curve as the jobs report was followed by US jobs data that persuaded many investors that more aggressive interest rate cuts in the United States will be needed to stimulate the economy.
The Canadian dollar closed at C$1.0093 to the US dollar, or 99.07 US cents, down from C$1.0044 to the US dollar, or 99.56 US cents, at Thursday's close.
At one point in the session the Canadian currency fell to C$1.0101 to the US dollar, or 99.00 US cents, but three successive days of rises heading into the week's final session proved enough to insure that it rose for a second straight week.
Details of the Canadian March jobs report signalled a softening jobs market and slowing economy, which supported calls for another Bank of Canada rate cut when the bank next sets interest rates on April 22.
"The jobs report came in close to expectations but the underlying details were even weaker with all of the strength being in part-time jobs and full-time jobs actually declining and offsetting part of that number," said David Powell, currency analyst at IDEAglobal in New York.
"We just had some further signs of a story that we already knew about in Canada. The economy is weakening and the Bank of Canada is going to continue to cut rates and that weighed on the Canadian dollar." The Bank of Canada has cut its overnight lending rate by 100 basis since December to 3.50 percent, which narrowed the gap with the US Federal Reserve's 2.25 percent rate.
Despite the Canadian dollar's overall gain for the week, it is still stuck in a range, around US dollar parity, that it has occupied for the better part of four months. Powell said it will take a move below C$1.0115 by the Canadian dollar for it to be considered out of that range. Canadian bond prices were higher as talk about further Fed rate cuts persuaded investors to put their money in more secure assets such as government debt.
The US data showed a third straight month of declines in nonfarm payrolls, which managed to rein in recent talk that the worst of the credit crisis has passed. "The report is just another indication that labour markets remain weak ... and with that expectations are rising in terms of the extent of further easing by the Fed," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "We just got this sort of this great pessimism about the US economy playing out in US markets and it spilled over into Canadian markets."
Canadian economic data due next week include a building permits report for February on Monday and housing starts figures for March on Tuesday. The two-year bond rose 14 Canadian cents to C$102.06 to yield 2.755 percent. The 10-year bond climbed 47 Canadian cents to C$103.68 to yield 3.525 percent. The yield spread between the two- and 10-year bonds was 77.0 basis points, up from 74.7 basis points at the previous close.