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.
‘Matters More’
“What matters more for Canada is the U.S. market, and the trade balance improved a lot in the U.S.,” Sebastien Galy, a foreign-exchange strategist at Societe Generale SA, said by phone from New York. “That’s the reason why dollar-Canada, even though it got hit and the risks are asymmetric, considering how badly positioned the market is for news out of Canada, it’s really a very subdued reaction.”
Employment in Canada fell in January for the first time in six months, dropping by 21,900 jobs following December’s revised gain of 31,200, Statistics Canada said today in Ottawa. The unemployment rate decreased to 7%, from 7.1%, the lowest since December 2008’s 6.8%, as fewer people looked for work.
Economists surveyed by Bloomberg News projected a 5,000-job gain and 7.2% unemployment.
Interest Rates
Bank of Canada Governor Mark Carney said Jan. 23 the need to raise interest rates is less urgent than previously thought because Canada’s economy will take longer to reach full output. Policy makers said an increase in the rate may still be needed over time. The central bank has kept its benchmark rate at 1% since 2010 to spur the economy.
The loonie fell against the currencies of Australia and New Zealand, which like Canada export commodities, after China’s trade expanded in January more than forecast. The Chinese government said exports gained 25% from a year earlier and imports rose 28.8%.
The Canadian dollar posted its biggest drop versus its Australian counterpart since October, sliding as much as 1% before trading at C$1.0342, down 0.8%. The loonie lost 0.7% to 83.69 cents per New Zealand dollar.
Canada’s currency has fallen 0.6% this year against 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The greenback has gained 0.6%, New Zealand’s dollar climbed 1.5%.
