Canadian dollar below parity as employment unexpectedly shrinks

Canada’s dollar weakened below parity with its U.S. counterpart for the first time in five days as employment unexpectedly dropped in January, adding to concern the world’s 11th-largest economy is slowing.

The currency fell against the majority of its 16 most-traded peers as the country also posted its ninth straight monthly trade deficit and housing starts for January fell to the lowest since the end of the 2009 recession. In the previous five months, Canada’s economy gained 183,900 jobs.

“The employment numbers were quite a bit softer than the market was anticipating, and we’d been fluttering around that parity level again and it broke through,” David Watt, chief economist at HSBC Holdings Plc’s Canadian unit, said by phone from Toronto. “But I don’t think the numbers were necessarily bad enough to change any perceptions about Canada. To my mind, all it really did was bring the employment levels back to a level that is more consistent with other economic data.”

The loonie, as the Canadian dollar is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 0.5% to C$1.0027 per U.S. dollar at 2:29 p.m. in Toronto. The currency touched C$1.0035, the weakest level since Jan. 31, and has lost 0.6% over the past five days. One Canadian dollar buys 99.73 U.S cents.

The currency weakened past its 200-day moving average of 99.90 cents per U.S. dollar.

The loonie pared losses as the Standard and Poor’s GSCI Index of 24 commodities rose 0.6%. Raw materials account for almost half of Canada’s export revenue. The S&P 500 Index of U.S. stocks gained 0.5%.

Bonds Rise

Canada’s government bonds rose after the employment report, pushing yields on benchmark 10-year debt down three basis points, or 0.03 percentage point, to 1.96 percent. The 2.75 percent security due in June 2022 gained 19 cents to C$106.60.

The government will auction C$3.3 billion ($3.29 billion) of two-year notes on Feb. 13. The 1 percent securities are due in May 2015.

Canada’s trade deficit narrowed in December to C$901 million from a revised C$1.67 billion last month as imports fell faster than exports, a government report showed. Housing starts plunged 19 percent in January to an annual pace of 160,577, Canada Mortgage & Housing Corp. said in a statement.

In the U.S., Canada’s largest trade partner, the trade deficit narrowed more than forecast in December to $38.5 billion, from a revised $48.6 billion in November. A $46 billion deficit had been forecast in a Bloomberg survey of economists.

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