TORONTO: The Canadian dollar strengthened to a one-week high against its US counterpart on Friday, with investor optimism buoyed by stronger-than-expected Canadian jobs data and a rally in oil prices.
The economy created 40,600 jobs in March, far surpassing economists' expectations for 10,000, and driven by a 35,300 increase in full-time jobs. The unemployment rate declined to 7.1 percent, its lowest since December.
"Canada is getting some positive benefits at least from a very diversified economy," said Sebastien Lavoie, assistant chief economist at Laurentian Bank.
The implied probability of a Bank of Canada interest rate cut this year dropped to 12 percent from 20 percent before the report. It was more than 50 percent a little more than one month ago.
Still, market players doubted the report would trigger a hawkish response from the Bank of Canada at next week's interest rate announcement.
The central bank "won't want to say anything that would push the currency up from here" mindful that a weaker currency had helped Canada's economy, said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.
Oil prices rose, lifted by fresh hopes that producing countries would agree to freeze oil output and firm economic indicators from the United States and Germany that boded well for fuel demand.
US crude prices settled at $39.72 a barrel, up 6.6 percent.
The Canadian dollar closed at C$1.3002 to the greenback, or 76.91 US cents, much stronger than Thursday's close of C$1.3144, or 76.08 US cents.
The currency's weakest level was C$1.3155, while it touched its strongest since March 31 at C$1.2952.
A report from the Canadian Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts fell to 204,251 units in March from an upwardly revised 219,077 units in February. Forecasters had expected 190,000 starts.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 7.5 Canadian cents to yield 0.564 percent and the benchmark 10-year falling 56 Canadian cents to yield 1.228 percent.
Canada-US bond spreads moved higher as Canadian government bonds underperformed.
The two-year spread rose 3.4 basis points to -13.5 basis points, its least negative since October, while the 10-year spread rose 3.2 basis points to -49.0 basis points, its least negative since May.
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