TORONTO: The Canadian dollar was little changed against its US counterpart on Friday, with the currency pulling back from an earlier three-week high after domestic jobs data tempered expectations for a Bank of Canada interest rate hike this month.
The decline of 1,100 jobs in April was well short of economists' forecasts for an increase of 17,400. But full-time jobs rose by nearly 29,000 and wage growth accelerated.
"I think it will shave the currency a little bit," said Doug Porter, chief economist at BMO Capital Markets. "Going into this report, the market had a strong probability of the Bank of Canada raising interest rates in May and I think this is going to cool some of that speculation."
Chances of a Bank of Canada interest rate hike at the May 30 announcement slipped to 39 percent from nearly 50 percent before the jobs data, the overnight index swaps market indicated.
At 9:12 a.m. EDT (1312 GMT), the Canadian dollar was trading nearly unchanged at C$1.2764 to the greenback, or 78.35 US cents. The currency touched its strongest since April 20 at C$1.2730.
The loonie is expected to strengthen over the coming year as a clearer outlook for the North American Free Trade Agreement opens the door to more Bank of Canada interest rate hikes, a Reuters poll of currency strategists showed.
US House Speaker Paul Ryan has set a May 17 deadline to be notified of a new NAFTA trade deal to give the current Congress a chance of passing it, while Mexico's top trade official on Thursday said time was running short to meet such a deadline.
The price of oil, one of Canada's major exports, steadied near 3-1/2 year highs as the prospect of new US sanctions on Iran tightened the outlook for Middle East supply.
US crude prices were down 0.2 percent at $71.19 a barrel. Canadian government bond prices were higher across a steeper yield curve, with the two-year
up 5 Canadian cents to yield 1.951 percent and the 10-year rising 12 Canadian cents to yield 2.382 percent.
The 10-year yield had touched its highest intraday since May 2014 at 2.417 percent.
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