* Canadian dollar strengthens 0.7% against the greenback
* Rebounds from weakest since June 8 at 1.3387
* Canada adds 59,900 jobs in June
* 2-year yield touches a 22-year high at 4.917%
TORONTO, July 7 (Reuters) – The Canadian dollar
strengthened against its U.S. counterpart on Friday, rebounding
from a four-week low, as stronger-than-expected domestic jobs
data bolstered expectations for another interest rate hike by
the Bank of Canada.
Canada’s economy added 59,900 jobs in June, the most since
January and far higher than a median forecast for a gain of
20,000, while the jobless rate rose to 5.4% from 5.2% as more
people searched for work.
“Today’s jobs report for June dispelled the notion raised
last month that the Canadian labor market has begun to sharply
cool,” said Jay Zhao-Murray, a market analyst at Monex Canada
Inc.
“Markets have begun to more confidently buy into our view
that the Bank of Canada is set to hike rates once more next
Wednesday.”
Money markets see a 67% chance that the BoC will lift its
benchmark interest rate by 25 basis points at next Wednesday’s
policy decision, up from about 60% before the data. The policy
rate is currently set at a 22-year high of 4.75%.
The Canadian dollar was trading 0.7% higher at 1.3270
to the greenback, or 75.36 U.S. cents, after earlier touching
its weakest level since June 8 at 1.3387. For the week, the
currency was down 0.3%.
Separate data showed that U.S. job growth slowed more than
expected in June, which helped cap U.S. bond yields, while the
price of oil, one of Canada’s major exports, added to its weekly
gain. It settled up 2.9% at $73.86 a barrel,
The Canadian 2-year yield touched its highest level since
July 2001 at 4.917% before pulling back to 4.775%, up 2.1 basis
points on the day.
The gap between the Canadian and the equivalent U.S. rate
narrowed by 9.1 basis points to a spread of about 16 basis
points in favor of the U.S. bond.
(Reporting by Fergal Smith
Editing by Alistair Bell and Susan Fenton)
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