The Canadian dollar weakened against its US counterpart on Friday after grim employment data in Canada and the United States sparked concerns the economic recovery may be flagging, sending investors to the safety of government bonds.
Major stock markets tumbled, the US dollar fell and US Treasury securities prices rallied after the weaker-than-expected US jobs report, while Brent crude oil fell to an eight-month low. Safe-haven gold prices rose. A risk-off tone typically hurts the Canadian dollar, and the downdraft was worsened because the Canadian data was weaker even than the unexpectedly tepid US employment data.
"On a relative basis our trade and employment numbers were softer than the US that's the fundamental reason (the Canadian dollar weakened further than the greenback)," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital. The Canadian currency fell to C$1.0236 to the US dollar, or 97.69 US cents, after the economic data was released, shedding more than a cent from Thursday's North American session close to hit a two-week low.
It recovered some ground during the day to end at C$1.0164 to the US dollar, or 98.39 US cents, still well below Thursday's North American session close at C$1.0123 to the US dollar, or 98.78 US cents. Canada's economy shed 54,500 jobs in March, more than wiping out the previous month's big gain and pushing up the jobless rate to 7.2 percent from 7.0 percent, Statistics Canada data showed on Friday. Market analysts had forecast an increase of 8,500 jobs. The price of Canadian government debt was higher across the curve as investors fled to safety. The two-year bond was up 3 Canadian cents to yield 0.978 percent while the benchmark 10-year bond rose 44 Canadian cents to yield 1.747 percent.