TORONTO (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Friday as domestic data showing a blockbuster jobs gain raised expectations of a more aggressive than usual interest rate hike next month by the Bank of Canada.
Canada added 336,600 jobs in February, more than double the 160,000 analysts had forecast, while the unemployment rate dropped below its pre-pandemic level for the first time as businesses reopened from strict Omicron restrictions.
Money markets moved to price in a 45% chance of a 50 basis point interest rate hike at the April 13 policy announcement, compared to 37% before the data.
The BoC usually moves in 25 basis point increments, as it did last week when it raised its benchmark rate from a record low of 0.25%, its first hike in three years.
The Canadian dollar strengthened 0.5% to 1.2700 per greenback, or 78.74 U.S. cents, after trading in a range of 1.2695 to 1.2794.
It was the third straight day of gains for the loonie, after it touched on Tuesday a 2-1/2-month low at 1.2901. For the week, it was on track to rise 0.2%.
Gains on Friday for the loonie came as Russian President Vladimir Putin said there had been some progress in Moscow’s talks with Ukraine, lifting investor sentiment at the end of a roller-coaster week for financial markets.
The price of oil, one of Canada’s major exports, rose on continued concerns about supply disruptions for Russian oil and oil products. U.S. crude oil futures were up 1.2% at $107.29 a barrel.
Canadian government bond yields were higher across the curve. The 10-year touched its highest level since Feb. 16 at 1.989% before dipping to 1.977%, up 4.1 basis points on the day.
(Reporting by Fergal Smith; Editing by Andrea Ricci)
