Bloomberg News

Canadian Dollar Falls for 3rd Day as Jobs Growth Misses Forecast

January 06, 2012

Jan. 6 (Bloomberg) -- Canada’s dollar weakened for a third day against its U.S. counterpart after a report showed the nation’s employers added fewer jobs in December than forecast and the jobless rate rose to the highest level since April.

The currency briefly pared losses after a report showed the U.S. unemployment rate unexpectedly dropped, bolstering optimism about the economy of Canada’s largest trading partner. The loonie, as the currency is sometimes known for the image of the aquatic bird on the C$1 coin, headed for a loss this week of 0.5 percent, its second straight.

“Disappointing report overall,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia, said of Canada’s jobs data by phone from Toronto. “Soft details combined with a miss on the expectation suggest that there are increasing internal headwinds for the Canadian economy.”

The currency depreciated 0.8 percent to C$1.0284 per U.S. dollar at 5 p.m. Toronto time after earlier rising 0.3 percent. One Canadian dollar buys 97.24 U.S. cents.

Crude, the nation’s biggest export, added 0.6 percent to $101.92 a barrel in New York after dropping to $100.88. The Standard & Poor’s 500 Index fell 0.3 percent.

Canada’s jobless rate increased to 7.5 percent from November’s 7.4 percent and the recent low of 7.1 percent in September, Statistics Canada said today in Ottawa. Employment rose by 17,500 in the first gain in three months. The median forecast of economists in Bloomberg News surveys of analysts and economists was for a 7.4 percent jobless rate and a gain of 20,000 jobs.

U.S. Employment

The U.S. added 200,000 jobs last month following a revised 100,000 gain in November that was smaller than initially estimated, Labor Department figures showed. The median forecast in a Bloomberg News survey called for a December gain of 155,000. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009, while hours worked and earnings climbed.

The labor market “continues to contribute to some of the optimism that’s been in the U.S. data,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said in a telephone interview. “It serves to show the divergence of economics and fundamentals between this side of the Atlantic and the other side of the Atlantic.” He predicted both the greenback and the loonie would outperform major counterparts into the new year.

The euro dropped against most of its major peers, including the dollars of Canada and the U.S., on speculation the sovereign-debt crisis is worsening.

Yearly Growth

Canada’s economy will grow at 2 percent pace this year, the U.S. will expand 2.1 percent, while the euro-area economy will contract 0.2 percent, according to the median forecasts in separate Bloomberg News surveys.

The currency fell on Oct. 4 to C$1.0658, the weakest level in more than a year, as Europe’s sovereign-debt crisis sapped demand for higher-yielding assets.

Shorter-term government bonds rose, pushing yields on benchmark two-year debt two basis points, or 0.03 percentage point, lower to 0.93 percent. The extra yield over U.S. Treasuries narrowed to 68 basis points, the smallest spread in a week. Canada will sell C$3.5 billion ($3.4 billion) of bonds maturing in May 2014 on Jan. 11.

The loonie will depreciate to C$1.05 by the end of the first quarter, according to the median forecast of 35 economists and analysts compiled by Bloomberg.

--Editor: Kenneth Pringle

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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


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