TORONTO – The Canadian dollar dropped sharply Friday amid lower commodity prices and disappointing reading on Canadian jobs.
The loonie closed down 0.76 of a cent at 93.16 cents US.
Statistics Canada reported that the economy unexpectedly lost 9,400 jobs in June, with the unemployment rate rising one-tenth of a point to 7.1 per cent — the highest since last December. Full-time employment rose by 33,500, partly making up for the loss of 43,000 part-time jobs.
Economists had expected the economy to produce some 24,000 jobs in June after a gain of 25,800 in May.
“The Canadian job market remains mired deep in a mid-cycle funk, with precious little employment growth over the past year,” said Doug Porter, chief economist with BMO Capital Markets.
These latest jobs figures will no doubt be front and centre at the Bank of Canada’s next interest rate announcement and latest monetary policy report scheduled for Wednesday.
Porter said it’s likely that the central bank will use it as a reason to keep rates at record-low levels.
“While there is much sound and fury surrounding monthly Canadian job tallies, often signifying very little, the underlying trend is unquestionably squishy soft,” he wrote.
“Simply, this gives the Bank of Canada all the justification it needs to still sound quite dovish in next week’s interest rate decision and quarterly monetary policy report, even with the recent uptick in prices. Their focus will likely shift from too-low inflation to too-low growth.”
The Canadian dollar has been hovering around the 94-cent US range as of late, which has raised concerns about how the higher currency may be affecting the country’s manufacturing and export sectors. Bank of Canada governor Stephen Poloz has been depending on a weakened Canadian dollar to help drive an export-led recovery.
The currency will also be looking for direction from the release of the latest inflation figures due next Friday, while commodities prices will also be top of mind.
The August crude contract on the New York Mercantile Exchange plunged $2.10 to US$100.83 a barrel Friday, resuming a two-week decline after a small uptick on Thursday. Oil prices shot up to $107 a barrel last month following lightening advances by insurgents in Iraq and other geopolitical concerns. However those concerns have since largely abated.
In other commodities, August gold bullion fell $1.80 to US$1,337.40 an ounce, while September copper was unchanged at US$3.27 a pound.
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