The Canadian dollar advanced against the US currency for an 11th straight session on Friday, hitting a 20-month high, after firmer than expected Canadian employment data provided more evidence that economic recovery is taking hold.
The Canadian dollar was already firmer in the overnight session, and after the jobs report it swiftly reached its highest level since July 2008 - C$1.0155, or 98.47 US cents - against the US currency.
Canada's unemployment rate fell to 8.2 percent in February from 8.3 percent in January as 20,900 more people found work in the month. Economists surveyed by Reuters had forecast net job growth of 20,000 jobs in February and an 8.3 percent unemployment rate.
"That was a lot more than a feather in the currency's cap. The jobs report was unambiguous. It showed again that the recovery is truly on," said Doug Porter, deputy chief economist at BMO Capital Markets. The Canadian dollar finished at C$1.0183 to the US dollar, or 98.20 US cents, up from C$1.0243 to the US dollar, or 97.63 US cents, at Thursday's close.
The solid employment report also raised expectations that the Bank of Canada will raise interest rates. Yields on overnight index swaps, which trade based on expectations for the central bank's key policy rate, edged higher after the report, showing the market saw credit tightening as slightly more likely than before the data. Market expectations are for core inflation to cool to 1.7 percent, and a surprise move higher toward the Bank of Canada's inflation target of 2 percent could spell more strength in the Canadian dollar and amplify debate on credit tightening policy.