Canadian dollar up, strong jobs data suggests central bank could move on rates

TORONTO – The Canadian dollar closed higher Friday as much better than expected job creation data for April raised hopes that the Bank of Canada could move on hiking interest rates sooner than thought.

But the commodity-sensitive currency closed well off early highs, impacted by losses for oil and copper.

The loonie closed up 0.08 of a cent to 99.91 cents US after running up as high as 100.46 cents US following Statistics Canada’s report that the economy cranked out 58,200 jobs, much higher than the 10,000 that economists had expected.

Still, the jobless rate edged up 0.1 of a percentage point to 7.3 per cent as more people were looking for work.

“While we had forecast no hikes by the Bank of Canada this year, today’s data clearly lean against that call and we will have to be on guard for further signs of a sharp growth pick up in data for March/April,” said Avery Shenfeld, chief economist at CIBC World Markets.

The loonie had lost ground earlier in the session as traders avoided risk amid a huge trading loss at American banking giant JPMorgan Chase, disappointing Chinese data and continued eurozone turmoil resulting from last weekend’s Greek elections.

Investors were nervous after JPMorgan announced after markets closed Thursday that it lost US$2 billion in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money.

Meanwhile, investors wondered what steps the Chinese government could take to get the world’s second-largest economy back on track.

Data released Friday showed that industrial production rose 9.3 per cent from a year earlier in April, slowing from a nearly 12 per cent increase in March.

Another report showed inflation also eased, to 3.4 per cent in April from 3.6 per cent the month before, giving the government greater leeway to ease policy to boost growth.

China’s economy grew 8.1 per cent in the first quarter of the year, a still robust rate but its slowest pace since 2009. It was below the previous quarter’s 8.9 per cent, but above the government’s 7.5 per cent target for the year.

Commodities backed off following the release of the Chinese data. The June crude contract on the New York Mercantile Exchange fell 95 cents at US$96.13 a barrel.

July copper slipped four cents to US$3.65 a pound. China is the world’s biggest consumer of the metal, which is viewed as an economic barometer as it is used in so many different industries.

The June bullion contract in New York was down $11.50 to US$1,584 an ounce.

Eurozone worries also weighed on markets.

Another general election is expected in Greece for next month following the failure of attempts to forge a government since Sunday’s indecisive poll.

The head of a small left-wing party and potential kingmaker in Greece’s coalition negotiations said Friday he would not join forces with the conservatives and socialists to form a government.