Canadian dollar lower, greenback strengthens amid strong U.S. employment report | iNFOnews | Thompson-Okanagan's News Source

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Canadian dollar lower, greenback strengthens amid strong U.S. employment report

January 08, 2014 - 8:27 AM

TORONTO - The Canadian dollar was lower Wednesday, hitting fresh multi-year lows as the greenback strengthened in the wake of strong U.S. jobs data.

The currency fell another 0.32 of a cent to 92.51 cents US after falling over a cent Tuesday to its lowest close since late 2009.

Payroll firm ADP reported that the American private sector created 238,000 jobs during December. That data came out two days before the release of the U.S. government's employment report for last month. Economists have expected that reading would show that the economy created about 195,000 jobs in total.

That was the second positive reading on U.S. employment to come out this week. On Monday, the Institute for Supply Management said its index for the non-manufacturing sector in January showed continuing expansion but at a slower pace. However, it also showed a strong move upward in its employment index.

The U.S. dollar rose against other currencies as the jobs data raised expectations that the U.S. Federal Reserve could move more quickly than thought to wind up its key stimulus program, the US$85 billion of monthly bond purchases. The Fed decided at its December meeting to cut those purchases by $10 billion starting this month with further tapering dependent on economic data.

Traders also looked ahead to the release of the minutes from that Fed meeting for clues as to further tapering. Analysts say indications that the Fed may accelerate the pace of the tapering could further strengthen the greenback.

The Canadian dollar's weakness Tuesday was partly ascribed to speculation about Fed tapering. But the loonie was also weakened by data showing an increase in the trade deficit for November. At the same time, other data showed the U.S. trade dropped 12.9 per cent to US$34.3 billion in November to its lowest level in four years as exports rose 0.9 per cent, aided by a 5.6 per cent rise in petroleum exports. Imports, including Canadian crude oil, dropped 1.4 per cent.

Meanwhile, Bank of Canada governor Stephen Poloz doesn’t appear in any hurry to raise the Bank of Canada’s trend-setting rate.

And, in an interview on CBC Tuesday, denied he was under international pressure to raise rates.

Federal Finance Minister Jim Flaherty suggested in a recent interview that there would be such pressure as a result of Fed tapering.

However, Poloz did say that Fed tapering will inevitably put pressure on Canadian bond yields, likely leading to an increase in long-term fixed mortgage rates even if the Bank of Canada does not increase its benchmark rate.

On the commodity markets, the February crude contract on the New York Mercantile Exchange was 12 cents higher to US$93.79 a barrel.

March copper rose a cent to US$3.37 a pound while February bullion slipped $9.30 to US$1,220.30 an ounce.

News from © The Canadian Press, 2014
The Canadian Press

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