Canadian dollar up amid better than expected job creation, falling commodities

TORONTO – The Canadian dollar closed slightly higher Friday at the end of a volatile session amid a better than expected reading on employment and mixed commodity prices.

The loonie was off the worst levels of the session, closing up 0.08 of a cent to 97.37 cents US after going as low as 96.54 cents US.

Statistics Canada reported the economy created about 7,700 jobs during May, a better showing than the approximately 5,000 jobs that economists expected.

Canada’s jobless rate was unchanged at 7.3 per cent.

Other data out Friday morning showed that the pace of home construction cooled in May after a strong showing in April. Canada Mortgage and Housing Corp. said the May figure of 19,264 estimated actual starts was more in line with the pace of the previous six months. On a seasonally adjusted annual basis, May starts hit 211,400 compared with 243,800 in April.

The agency also reported that Canada posted a trade deficit of $367 million in April, down from a surplus of $152 million in March. The deficit reflected a sharp 5.8 per cent drop in exports of industrial goods and materials.

Meanwhile, traders looked ahead to the latest trade and industrial data from China later Friday that might be even weaker than pessimistic forecasts expect.

China has rolled out a series of measures to stimulate the economy after growth fell to a near three-year low of 8.1 per cent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter’s growth to fall further as the Chinese government worked to bring inflation down from unacceptable levels. On Thursday, the Chinese central bank announced it was cutting a key rate by 0.25 of a point to help boost growth.

Europe was also sharply in focus as the government debt crisis has now infected Spain and its banks, which are laden with billions of euros of toxic loans as a result of the collapsed housing sector.

Expectations are rising that Spain’s leaders will have to seek an international bailout for banks, which credit agency Fitch estimates could reach €100 billion. According to unconfirmed reports in Reuters, Spain is set to request an aid package for banks on Saturday.

However, Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said Friday the government will not act before receiving evaluations from the IMF on Monday and then from two independent auditors Spain has hired. The economy ministry said on its website the latter are expected by June 21 at the latest.

Ratings agency Fitch cut the Spanish sovereign debt rating to BBB late Thursday, which is two notches above ‘junk’.

Commodity prices were mixed as markets weighed demand prospects from a slowing global economy.

The July crude contract on the New York Mercantile Exchange fell 72 cents to US$84.10 a barrel.

The July copper contract declined nine cents to US$3.28 a pound while August bullion gained $3.40 to US$1,591.40 an ounce.