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Canadian Dollar Edges Higher as Greenback Weakens

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Canadian Dollar Edges Higher as Greenback Weakens

The Canadian dollar advanced Wednesday, as commodity prices edged higher and the US dollar succumbed to bearish pressure.

The Canadian dollar climbed 0.2 percent to 0.9186 US. The loonie lost ground last week after Statistics Canada said employment levels unexpectedly declined in April, diminishing hopes the labour market was stabilizing after a prolonged period of volatility. The Canadian economy lost nearly 29,000 jobs in April, following a gain of nearly 43,000 the prior month. The unemployment rate held steady at 6.9 percent as the participation rate fell from 66.2 percent to 66.1 percent.

According to Statistics Canada, jobs growth has been negligible since August 2013. The Bank of Canada corroborated that point Tuesday in its spring review, where it said the fall in the unemployment rate likely exaggerated the country’s labour market recovery.

According to the BOC, Canada’s unemployment rate may have “modestly” overstated the extent of the labour market’s recovery, supporting the view the unemployment rate is an incomplete measure of the labour market’s performance.

Canada’s unemployment rate has fallen 1.8 percentage points since the height of the recession in August 2009. The recession of 2007-09 resulted in the loss of 430,000 jobs, the BOC reported yesterday in its spring review.

Statistics Canada will report on manufacturing shipments Thursday, before closing out the week with a report on Canadian and foreign portfolio investment.

The US dollar index, a weighted average of the greenback’s performance versus six major peers, fell 0.1 percent to 80.06. The dollar index showed strength earlier in the day as the euro weakened. The euro had recovered by the North American session, climbing 0.11 percent to 1.3720.

The US dollar index has advanced more than 1 percent over the past five days, recovering from a six-month low.

The greenback continued to face bearish pressures Wednesday, as speculation about monetary policy diminished demand for the world’s most traded currency. The markets are closely monitoring the Federal Reserve for clues about a possible rate-hike. The central bank has been tight-lipped about when that might occur. In March Fed Chair Janet Yellen told reporters the central bank could raise interest rates six months after closing the books on quantitative easing. Since then, Yellen has backtracked, telling investors to focus on the official policy statement, which emphasized keeping borrowing costs at record lows.

The Fed reduced the pace of asset purchasing by another $10 billion at the April 29-30 policy meetings. The central bank is expected to end its record bond-buying program in the fall.

In economic data, the Commerce Department will report on consumer price inflation Thursday, the same day the Board of Governors of the Federal Reserve releases data on industrial production and Treasury International Capital.

Consumer inflation is expected to have risen in April, according to forecasts. Yellen said last week in her testimony to the Joint Economic Committee the central bank expects the economy to accelerate further in 2014, which would push inflation closer to the 2 percent target.

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