* Loonie strengthens 0.4% against the greenback
* For the week, loonie weakens 0.2%
* Canada adds 39,900 jobs in August
* Canada-U.S. 2-year spread narrows by 3.6 basis points
TORONTO, Sept 8 (Reuters) – The Canadian dollar
strengthened against its U.S. counterpart on Friday, as
stronger-than-expected domestic jobs data kept alive prospects
of another rate hike by the Bank of Canada after the central
bank moved to the sidelines earlier in the week.
The loonie was trading 0.4% higher at 1.3625 to the
greenback, or 73.39 U.S. cents, after moving in a range of
1.3609 to 1.3689.
Still, it was down 0.2% for the week, a day after touching a
five-month low at 1.3694.
Canada’s economy added 39,900 jobs in August, more than
twice estimates for a gain of 15,000, and the unemployment rate
remained at 5.5%, a sign of underlying economic strength despite
high interest rates.
Money markets see a 44% chance of another BoC rate hike by
year-end, up from 36% before the data. On Wednesday, the central
bank left its benchmark rate on hold at a 22-year high of 5%
after hikes in June and July, noting that the economy had
entered a period of weaker growth.
The jobs data is “not strong enough to prompt an immediate
rethink on the pause, but it’s also certainly not soft enough to
rule out further hikes”, Doug Porter, chief economist at BMO
Capital Markets, said in a note.
Adding to support for the loonie, U.S. crude oil futures
were up nearly 1% at $87.72 a barrel as investors chose
to focus on tighter supply despite broader macroeconomic
uncertainty, while the U.S. dollar edged lower against a
basket of major currencies.
The Canadian 2-year yield rose 5.9 basis points to
4.669%, while the gap between it and its U.S. equivalent
narrowed by 3.6 basis points to 30.9 basis points in favor of
the U.S. note.
(Reporting by Fergal Smith; editing by Mark Heinrich and Leslie
Adler)
Read More: CANADA FX DEBT-Jobs data helps Canadian dollar pare weekly decline