Canada's Dollar Falls From 11-Month High as Companies Cut Jobs

Canada's dollar fell from an 11- month high as the nation unexpectedly shed jobs in April for the first time in eight months.

The currency snapped a seven-week rally as traders reduced bets the Bank of Canada will lift interest rates. The currency also dropped after government data showed the nation's trade surplus narrowed.

``There might be further weak spots in the Canadian economy,'' said Camilla Sutton, a currency strategist at Scotia Capital Inc. in Toronto. ``People might think that Canada isn't totally immune from the U.S. economic weakness.'' Canada sends more than 80 percent of its exports to the U.S.

Canada's dollar fell 0.3 percent this week to 90.04 U.S. cents. It touched an 11-month high of 90.86 U.S. cents on May 8. One U.S. dollar buys C$1.1106.

The Canadian dollar also dropped 0.8 percent versus the New Zealand currency yesterday and 1.3 percent against the South African rand.

Canada's economy shed 5,200 jobs last month after creating 54,900 positions in March, Statistics Canada said yesterday. The median forecast of economists surveyed by Bloomberg was for 19,000 new jobs in April. The unemployment rate held steady at 6.1 percent.

Smaller Surplus

``The reaction to this number is pretty obvious,'' said Steven Barrow, chief currency strategist at Bear Stearns International Ltd. in London, referring to the employment total. ``It would be wrong to assume that this data will produce a wholesale change in the perception about the Canadian economy.''

Canadian employers have added about 1.9 million workers since 2001, in a country of 32.8 million people, as corporate profits have swelled from exports of energy and other commodities. Job growth has fueled record homebuilding and consumer spending.

A separate report this week showed Canada's trade surplus unexpectedly narrowed in March. The surplus totaled C$4.6 billion ($4.19 billion) from C$5.2 billion in February.

Canada's economy, the world's eighth-largest, grew 0.4 percent in February, Statistics Canada said last week, double what economists expected.

Interest-Rate Bets

The labor report prompted investors to trim bets the Bank of Canada will raise its 4.25 percent benchmark rate later this year to curb inflation.

The yield on the September bankers' acceptances futures contract fell 2 basis points, or 0.02 percentage point, to 4.42 percent on the Montreal Exchange.

Bankers' acceptances futures have settled at a three- month lending rate averaging 16 basis points above the central bank's rate target since Bloomberg started tracking the difference in 1992.

The Canadian dollar has gained about 5 percent against the U.S. dollar this year on signs the Canadian economy is strengthening while the U.S. weakens. The Canadian currency reached a 28-year high of 91.44 cents May 31.

``Currency investors didn't overreact to this number'' in the job report, said Firas Askari, head currency trader in Toronto at BMO Capital Markets. ``Canadian fundamentals are still very strong. There are happy buyers of the Canadian dollar around the C$1.1170 area.''

Canada's government bonds rose this week, pushing the yield on the benchmark 10-year bond down 1 basis point to 4.19 percent. The price of the 4 percent security maturing in June 2016, rose 12 cents C$98.60.

To contact the reporter on this story: Haris Anwar in Toronto at