TORONTO: The Canadian dollar weakened against the greenback on Friday as a strong domestic employment report was offset by better-than-expected jobs figures in the United States which bolstered expectations the Federal Reserve could reduce its stimulus sooner rather than later.
Trading was choppy early in the session with the loonie retreating to its 3-1/2-year low shortly after the jobs reports were released, matching a trough hit on Wednesday.
Data showed Canada added 21,600 jobs last month, far greater than the 12,000 that economists had expected, while the unemployment rate held at 6.9 percent.
The Canadian dollar firmed to a session high after the report, but quickly whipsawed lower after a separate report showed the US economy created 203,000 jobs in November, also better than forecast.
"All in all, in the medium-term, what is good for the US is good for Canada," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
"However, I think in the short-term, the focus is really on the outperforming US number and the expectation that it is pulling expectations for Fed tapering to January."
The Canadian dollar was at C$1.0647 to the greenback, or 93.92 US cents, weaker than Thursday's close of C$1.0641, or 93.98 US cents. The loonie traded as low as C$1.0708 and as high as C$1.0622.
The currency has been hammered in recent weeks by a host of factors, including a more dovish Bank of Canada, weak oil prices and uncertainty about the path of monetary stimulus south of the border.
A faster timeline for the Fed reducing its $85 billion a month in bond purchases is seen as bearish for the Canadian dollar as the move is expected to reduce risk appetite and benefit the US currency.
The strength of the jobs market is seen as key to determining when the Fed will start to withdraw. Central bankers next meet on Dec. 17-18.
Government bond prices were mostly lower across the maturity curve. The two-year bond was off 1-1/2 Canadian cents to yield 1.094 percent, while the benchmark 10-year bond fell 30 Canadian cents to yield 2.681 percent.
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