Canadian dollar hits 2-month low after jobs loss

The Canadian dollar (CAD) weakened to a near two-month low against US Dollar (USD) on Friday, as signs of cooling in the domestic jobs market led to reduced bets for additional interest rate hikes by the Bank of Canada.

The loonie was trading 0.2% lower at 1.3372 to the greenback, or 74.78 U.S. cents, after touching its weakest level since June 7 at 1.3393.

For the week, the risk-sensitive currency was down 0.9%, its third straight weekly decline, as a jump in long-term bond yields rattled equity market investors.

“A lot of the risk-off this week was driven by the yield curve resteepening after a deep inversion, which is a bit of a bearish signal,” said Jay Zhao-Murray, market analyst at Monex Canada Inc.

“Today, we got the jobs data that came in soft. I really think that this is the first real signal that the labour market is generally starting to cool.”

The Canadian economy shed 6,400 jobs in July, missing estimates for a gain of 21,100, while the jobless rate ticked up to 5.5%. Money markets see chances of another Bank of Canada rate hike this year at about 50%, down from 80% before the jobs report.

The U.S. dollar gave back some recent gains against a basket of major currencies as U.S. employment data showed the economy adding fewer jobs than expected in July.

The price of oil, one of Canada’s major exports, settled 1.6% higher at $82.82 a barrel, helped by this week’s pledge by major producers to extend supply cuts through September.

Canadian government bond yields fell across the curve. The 10-year was down 16 basis points at 3.553%, after touching on Thursday its highest intraday level since October at 3.734%.