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Loonie backtracks, but poised for weekly gain

H.S. Borji
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Loonie backtracks, but poised for weekly gain

The Canadian dollar was on its heels Friday, as investors bid up the greenback after US nonfarm payrolls rose at the fastest pace in more than two years.

The loonie tumbled to a session low of 0.9090 US before consolidating north of the 0.91 handle. The Canadian dollar was trading at 0.9109 in the afternoon session, down 0.15 percent. The US dollar was supported by a booming jobs report, courtesy of the Labor Department. US employers added 288,000 payrolls in April, far outpacing expectations.

Despite the setback, the Canadian dollar is poised for a weekly gain of 0.5 percent, thanks to advances made early in the week. Easing risk aversion ahead of Wednesday’s Federal Reserve policy statement was the biggest factor behind the loonie’s success this week. Canada’s currency on Tuesday rose above 91 US cents for the first time since mid-April. Looking ahead to next week, the Canadian dollar will react to several pieces of economic data, including international trade, PMI, building permits, housing starts and employment.

Strong economic data next week will further reduce the likelihood of a Bank of Canada rate cut. On the other hand, the central bank remains committed to leaving interest rates highly accommodative. The BOC has left its benchmark rate unchanged at 1 percent since September 2010.

Early estimates show Canada’s economy generated 11,000 job in April, following a gain of 42,900 the prior month. The unemployment rate, currently at a pre-recession low of 6.9 percent, is expected to have remained unchanged.

Canada’s economy, for all its inconsistencies, is forecast to grow 2.3 percent this year, according to the International Monetary Fund.

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