The Canadian dollar weakened against its US counterpart on Friday, pulling back from an earlier five-week high, as sliding stock and oil prices offset stronger-than-expected domestic jobs data. Wall Street was pressured by renewed US-China trade tensions and by the prospect of more Federal Reserve interest rate hikes. "The markets are very fast assessors of situations and so I think that (decline in stocks) has weakened the Canadian dollar off," said Amo Sahota, director at Klarity FX in San Francisco.
Canada's commodity-linked currency is sensitive to movement in stock markets due to the signal it can send about the global economic outlook. At 4 pm EDT (2000 GMT), the Canadian dollar was trading 0.1 percent lower at C$1.2769 to the greenback, or 78.31 US cents. But the currency, which rose 1 percent for the week, had earlier touched its strongest intraday since February 27 at C$1.2732.
Investors expect the Canadian dollar's advance to extend over the coming year due to improved prospects for a revamped North American Free Trade Agreement, a Reuters poll of currency strategists showed. Canada created 32,300 jobs in March, Statistics Canada said, topping economists' forecasts for an increase of 20,000. Still, speculators have raised bearish bets on the Canadian dollar, data from the US Commodity Futures Trading Commission and Reuters calculations showed. As of April 3, net short positions had increased to 31,872 contracts from 27,050 a week earlier.
Canadian government bond prices were higher across a flatter yield curve in sympathy with US Treasuries. The two-year rose 3.5 Canadian cents to yield 1.79 percent and the 10-year climbed 31 Canadian cents to yield 2.142 percent. The gap between Canada's 2-year yield and its US equivalent narrowed by 1.8 basis points to a spread of -48 basis points.
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