TORONTO: The Canadian dollar extended its retreat against the US dollar on Friday hit by a slew of negative domestic data including a January trade deficit that more than doubled, and robust US job growth in February.
US employment accelerated in February and the jobless rate fell to a more than 6-1/2-year low of 5.5 percent, signs that could encourage the Federal Reserve to consider hiking interest rates in June. Nonfarm payrolls rose 295,000 last month after rising 239,000 in January. Economists polled by Reuters had expected a 240,000 rise.
In Canada, the trade deficit hit C$2.45 billion ($1.94 billion), hurt by cheap crude, a key Canadian export. It was considerably wider than the C$1 billion shortfall analysts had expected and the second highest after the C$2.87 billion recorded in July 2012.
Meanwhile, labor productivity dropped by 0.1 percent in the fourth quarter of 2014, in contrast to forecasts of no change, and the value of Canadian building permits issued in January sank by 12.9 percent to C$6.13 billion. Market analysts had forecast a 4.3 percent drop.
The Canadian dollar was at C$1.2598 to the greenback, or 79.38 US cents at 9:35 a.m. (1435 GMT), weaker than Thursday's close of C$1.2506, or 79.96 US cents. It had briefly touched C$1.2618, or 79.25 US cents earlier, its softest level in nearly two weeks.
The North American data demonstrated the strength of the US economy compared to Canada, underscoring the likely divergence in the monetary policies of the two countries.
"The payroll number doesn't pull the doors off, but it certainly puts a June Fed hike squarely back on the table," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, calling the Canadian data were big misses.
"It puts an April rate cut right back on the table ... the sigma of the Canadian trade data - that's a good sized negative."
Canadian government bond prices were mostly lower across the maturity curve, with the two-year slipping 3.5 Canadian cents to yield 0.640 percent and the benchmark 10-year falling 43 Canadian cents to yield 1.571 percent.
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