TORONTO: The Canadian dollar gained against its US counterpart on Thursday, as broad selling of the greenback overshadowed the impact of strong Canadian economic data as well as the first public appearance by the new Bank of Canada governor.
Attention now turns to twin North American employment reports due out on Friday morning, with much of the US dollar weakness caused by investors positioning for a disappointing US print.
The loonie, as Canada's currency is colloquially known, rose to its highest level in nearly three weeks as US dollar selling accelerated near the close of the European trading session.
"It's really an across the board selloff of US dollars, with the catalyst being a break of technical support of dollar/yen," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
Earlier US dollar weakness was triggered by the European Central Bank ruling out cutting its overnight deposit rate below zero for now.
The Canadian dollar ended the session changing hands for C$1.0260 to the greenback, or 97.47 US cents, compared with C$1.0346, or 96.66 US cents, at Wednesday's North American close. At one point it hit C$1.0198, its strongest level since May 17.
The US dollar-led activity overshadowed comments by new Bank of Canada Governor Stephen Poloz, who stressed that Canadian rates would one day rise from rock-bottom levels but said there was no evidence that current low rates were posing excessive risks.
"It's fairly neutral overall, but if anything I would say it errs on the side of being less dovish than anyone expected," said Camilla Sutton, chief currency strategist at Scotiabank, referring to Poloz's two hours of testimony to parliament.
Economic data also gave support to the loonie, as the pace of purchasing activity in Canada jumped higher than expected in May, according to Ivey Purchasing Managers Index data.
Meanwhile, reports this week suggesting slower hiring by US firms in May hurt the greenback as it raised the risk that Friday's non-farm payrolls could disappoint and lessen the likelihood the Federal Reserve will taper its easing program early.
Canada will also report monthly jobs data for May on Friday.
The price of Canadian government debt was higher across the curve, with the two-year bond up half a Canadian cent to yield 1.050 percent, while the benchmark 10-year bond gained 4 Canadian cents to yield 2.041 percent.
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