TORONTO: The Canadian dollar weakened against the greenback on Thursday, hurt by a rallying US dollar and investor positioning ahead of Friday's Canadian employment report for March.
The Canadian economy has been feeling the pinch from the dramatic plunge in crude prices since last summer and markets have broadly expected the first quarter to be especially weak.
Economists polled by Reuters expect no new jobs to have been created last month, and the unemployment rate to remain steady at 6.8 percent.
Meanwhile the US dollar hit its highest level in almost three weeks on Thursday, as interest rate differentials with Europe widened.
"Today's move can be partially explained by overall US dollar appreciation almost across the board," said Brad Schruder, director of foreign exchange sales at BMO Capital Markets, adding that this was likely the beginning of another round of US dollar moves higher and that the cautious trade was not to be long on the Canadian dollar.
"What you're also seeing is a combination of some profit-taking in preparation of the risk with tomorrow's number, which is definitely to the downside as far as job creation goes."
The Canadian dollar finished the session at C$1.2592 to the greenback, or 79.42 US cents, more than half a cent weaker than the Bank of Canada's official close of C$1.2538, or 79.76 US cents, on Wednesday.
The Canadian dollar has been trading between C$1.2350 and C$1.2850 since January, when the Bank of Canada shocked markets with a 25 basis point interest rate cut.
Early in the day, US data showed the number of Americans filing new claims for jobless benefits rose less than expected last week, suggesting an abrupt slowdown in job growth in March could be temporary.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.513 percent and the benchmark 10-year sliding 32 Canadian cents to yield 1.374 percent.
The Canada-US two-year bond spread was -3.9, while the 10-year spread was -58.9.
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