TORONTO: The Canadian dollar slipped versus the greenback on Friday as oil prices slumped and after stronger-than-expected US jobs data, but the currency pared losses as markets doubted the Federal Reserve will surrender its cautious stance.
The Canadian dollar settled at C$1.3014 to the greenback, or 76.84 US cents, weaker than Thursday's close of C$1.2987, or 77.00 US cents.
It had touched its weakest in three days at C$1.3147 earlier in the session, after appreciating 6.5 percent in the first quarter of 2016.
US employment jumped in March, but an influx of Americans into the labor market could restrain nascent wage gains and keep the Fed cautious on raising interest rates.
That data followed comments from Fed Chair Janet Yellen this week that slowing world growth and lower oil prices posed a downside risk to the US economic outlook, which the Fed last month downgraded as it forecast only two rate hikes this year.
"It's only a matter of time before the conversation turns to 'OK nothing in 2016, what's the first date they're looking to go in 2017'," said Brad Schruder, director of corporate sales and structuring at Bank of Montreal. "And that will be a very bearish conversation vis-a-vis the US dollar."
Schruder said the loonie, as Canada's currency is colloquially known, should also do well against the euro and British pound in coming months as the Brexit vote and accommodative monetary policy from the European Central Bank weigh on those currencies.
The loonie touched a 5-1/2-month high at C$1.2859 on Thursday after monthly gross domestic product (GDP) data showed a surprising jump in economic growth that further dented expectations for a Bank of Canada rate cut.
Oil tumbled more than 4 percent after a Saudi prince reportedly said the kingdom will not freeze output without Iran and other major producers doing so.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 1.5 Canadian cents to yield 0.547 percent and the benchmark 10-year falling 14 Canadian cents to yield 1.24 percent.
The Canada-US 10-year spread was 2.4 basis points narrower at -53.5 basis points, its least negative since Oct. 20, as Treasuries outperformed at the long end.
Canada plans to stick with major investment plans included in last week's budget, regardless of the level of the Canadian dollar or a pickup in short-run growth, the country's finance minister said.
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