Canadian dollar rises ahead of monthly employment data

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Thursday as investors took stock of recent gains for the American currency ahead of employment data on both sides of the border that could guide expectations for interest rate cuts.

The loonie was trading 0.2% higher at 1.4050 to the U.S. dollar, or 71.17 U.S. cents, after trading in a range of 1.4011 to 1.4079. Still, it has weakened 4.5% since late September.

“Ultimately, I think the driver in the move is a little bit of profit-taking in the U.S. dollar,” said Rahim Madhavji, president at KnightsbridgeFX.com. “People are getting ahead of what we’re going to see tomorrow in (U.S.) non-farm payrolls.”

The Canadian dollar is expected to recoup only a small fraction of its recent losses over the coming year as the threat of U.S. trade tariffs hampers the outlook for Canada’s export-dependent economy, a Reuters poll found.

The greenback fell on Thursday against a basket of major currencies as initial claims for U.S. state unemployment benefits rose and investors stuck with bets the Federal Reserve would cut interest rates at a policy decision on Dec. 18.

Canada and the United States are due to release their November employment reports on Friday.

Economists expect a Canadian jobs gain of 25,000, while U.S. non-farm payrolls are forecast increasing by 200,000.

The Bank of Canada is expected to continue its easing cycle at a policy decision next Wednesday.

Domestic data on Thursday showed that Canada’s trade deficit narrowed to C$924 million ($657.60 million) in October.

The price of oil, one of Canada’s major exports, fell 0.4% to $68.25 a barrel even as OPEC+ delayed its planned output increase by three months.

Canadian bond yields edged lower across the curve, with the 10-year down 1.4 basis points at 3.064%.

(Reporting by Fergal Smith; Editing by Andrea Ricci)