Oil 'tailwind' helps Canadian dollar end weekly losing streak

·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar rallied against its U.S. counterpart on Friday as oil notched a one-year high and investors shrugged off data showing Canada lost far more jobs than expected in January, with the loonie ending a three-week run of weekly declines.

The loonie was trading 0.5% higher at 1.2766 to the greenback, or 78.33 U.S. cents, having traded in a range of 1.2765 to 1.2832.

The currency was up 0.1% for the week despite gains for the U.S. dollar against a basket of major currencies.

"The bull market in commodities is a nice tailwind for the Canadian dollar," said Adam Button, chief currency analyst at ForexLive.

The loonie is expected to rally further over the coming year as a global economic recovery takes hold, and the gains could accelerate if investors perceive the Bank of Canada is preparing to reduce monetary stimulus, strategists say.

U.S. crude oil futures settled 1.1% higher at $56.85 a barrel and Wall Street climbed to record highs as a smaller-than-expected rebound in the U.S. labor market last month highlighted the need for more government aid to shore up the economy.

Canada shed 212,800 jobs in January, with the declines driven by coronavirus lockdowns in populous Ontario and Quebec, Statistics Canada data showed. Analysts had expected a loss of 47,500 jobs.

"The details of the Canadian employment report are much better than the headline suggested," Button said. "The hours worked is getting a lot of attention."

Hours worked increased by 0.9%, boosting prospects for GDP growth, analyst said. Separate data showed Canada's trade deficit narrowing more than expected to C$1.7 billion ($1.3 billion) as exports rose.

Canadian government bond yields were higher across a steeper curve, with the 10-year up 3.7 basis points at 1.001%. It touched its highest intraday since last March at 1.018%.

(Reporting by Fergal Smith; Editing by Paul Simao and Alistair Bell)

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