Bloomberg News

Canadian Dollar Drops as U.S. Jobs Growth Weakest in 9 Months

July 08, 2011

July 8 (Bloomberg) -- Canada’s dollar weakened after a U.S. government report showed employers added fewer jobs last month than economists forecast.

The loonie, as the currency is nicknamed, fell the most against the Swiss franc as U.S. employers hired 18,000 workers in June, less than forecast and the fewest in nine months, while the unemployment rate unexpectedly climbed, boosting concern that the U.S. economy is struggling. Canada ships about three quarters of its exports to the U.S. Canada’s currency strengthened earlier after a report showed the nation added more jobs than forecast last month.

“The U.S. numbers were a disappointment, and the loonie is falling out of bed,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Bad economic news in the States typically hits the Canadian dollar.”

The Canadian currency fell 0.4 percent to 96.27 cents per U.S. dollar at 5 p.m. in Toronto, compared with 95.87 yesterday. It declined 1.4 percent to 86.80 Swiss centimes. One Canadian dollar buys $1.0389.

The increase in U.S. payrolls followed a 25,000 gain that was less than half the rise initially estimated, Labor Department data showed today in Washington. The median estimate in a Bloomberg News survey called for a June gain of 105,000. The unemployment rate rose to 9.2 percent, the highest level this year. Hiring by companies, which excludes government agencies, was the weakest since May 2010.

‘Horrid Number’

The U.S. employment report “says it all,” Dean Popplewell, head analyst in Toronto at the online currency- trading firm Oanda Corp., said in an e-mail. It’s “a horrid number for markets and for the loonie that is guilty by association. A sliver of optimism that we had has been thrown to the sidelines.”

The loonie earlier touched the highest level since May after a government report showed Canada’s employers added more jobs last month than economists forecast.

Canada’s economy created 28,400 jobs in June after boosting payrolls by a net 22,300 positions in the previous month, Statistics Canada reported today. The median forecast of 27 economists in a Bloomberg News survey was for a gain of 15,000. The jobless rate held at 7.4 percent.

Employment in Canada “remains supportive of consumption going into the third quarter,” Matthieu Arseneau, an economist at National Bank Financial in Montreal, said in a note to clients. “The U.S. soft patch in the first half did not affect the Canadian labor market performance. This bodes well for the domestic demand going forward.”

Yields Fall

Yields on two-year Government of Canada bonds fell eight basis points, or 0.08 percent, to 1.5 percent, pushing the price of the 2 percent note due in August 2013 up 16 cents to C$101.01. The yield on the 10-year note fell nine basis points to 2.96 percent.

Crude oil futures fell 2.2 percent to $96.52 a barrel in New York as of 5:13 p.m. Crude is Canada’s largest export. Copper futures for September delivery declined 3 cents, or 0.7 percent, to close at $4.412 a pound on the Comex in New York. Canada derives about half its export revenue from raw materials.

Canada’s dollar has weakened 1.7 percent this year versus the currencies of nine other developed nations in the fourth- worst performance, according to Bloomberg Correlation-Weighted Currency Indexes. The greenback has fallen 5.6 percent, the yen is off 5 percent and sterling is down 2.6 percent.

--With assistance from Chris Fournier in Halifax, Nova Scotia. Editors: Paul Cox, Greg Storey

To contact the reporter for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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