TORONTO: The Canadian dollar reversed earlier gains against the US dollar on Friday as global risk appetite faded and investors took profits after a four-day rally.
Earlier in the session, the currency was on track to mark its biggest weekly gain in more than two years. It seemed to largely shrug off surprisingly weak domestic employment data as European policymakers again appeared ready to collaborate on tackling the region's debt crisis, and after US job numbers came in strong.
"It's very much a case of the broader theme that we've seen risk appetite starting to diminish as we're going through the afternoon session here in Europe," said Jeremy Stretch, head of currency strategy at CIBC World Markets in London.
"I think there was always a risk that there could be a degree of profit-taking coming in during the course of the afternoon because obviously we've seen some pretty dramatic moves over the last 48 hours or so."
At 12:35 p.m. (1735 GMT), the currency stood at C$1.0170, or 98.33 US cents, down from Thursday's finish at C$1.0143 against the US dollar, or 98.59 US cents.
Before the jobs numbers, the currency rallied as strong as strong as C$1.0080 against the US dollar, or 99.21 US cents, a recent resistance level still intact. On the support side, C$1.0215-25 is eyed.
Canada's economy unexpectedly lost jobs for a second straight month in November, raising concern that weakness in other countries may do lasting harm to an economy that has so far been surprisingly robust.
The economy shed 18,600 jobs in November, which pushed the unemployment rate up to 7.4 percent. Analysts surveyed by Reuters had forecast, on average, a gain of 19,100 jobs with the unemployment rate holding steady.
By contrast, the US unemployment rate fell to a 2-1/2 year low of 8.6 percent in November, even though the pace of hiring remained too slow to suggest a significant quickening of the recovery.
"It's also a case that obviously the rally or the improvement that we were seeing in the European bond market space looks less robust now than it did earlier in the session," added Stretch.
He noted next week is full of headline risk, prompting investors to make sure positions are kept relatively light going into the weekend.
Investors are readying for a European Union summit next Friday, more euro zone debt sales and a busy data calendar.
As well, markets will be paying close attention to any shifts in the Bank of Canada's scheduled rate policy announcement on Tuesday.
Canadian government bond prices were mixed across the curve.
The two-year bond was up 5 Canadian cents to yield 0.911 percent, while the 10-year bond slipped 2 Canadian cents to yield 2.138 percent.
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