Canada Dollar Gains After Payrolls Rise in Nation, Fall in U.S.

By Cordell Eddings

Sept. 5 (Bloomberg) -- Canada's dollar rose after a government report showed the nation's employers added more jobs in August than forecast, spurring speculation the Bank of Canada may refrain from cutting borrowing costs next month.

The currency also gained after another report showed the U.S., Canada's biggest trade partner, lost more jobs than forecast in August and its unemployment rate climbed to a five- year high. The report fueled expectations the Federal Reserve will cut rather than raise interest rates.

``The overall trend for the Canadian dollar is higher,'' said Maria Jones, a currency strategist at TD Securities in Toronto, a unit of Canada's third-largest bank. ``As far as the U.S. numbers are concerned, what's important is not necessarily the jobs report, but the unemployment rate says clearly the Fed is not going to hike rates any time soon, so we should see some retracement in the dollar strength that will bode well for the Canadian dollar.''

Canada's currency rose 0.3 percent to C$1.0663 per U.S. dollar at 10:12 a.m. in Toronto, from C$1.0696 yesterday. One Canadian dollar buys 93.78 U.S. cents.

The currency pared gains after the Ivey purchasing managers' index for August unexpectedly fell to 51.5, the lowest since December, showing that Canadian business and government spending increased at a slower pace.

The Canadian economy added 15,200 jobs last month after a loss of 55,200 positions in July, Statistics Canada said in Ottawa today. The median forecast of 23 economists surveyed by Bloomberg News was for an increase of 10,000. Canada's unemployment rate held at 6.1 percent.

U.S. Payrolls

U.S. payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said in Washington. The U.S. jobless rate jumped to 6.1 percent, matching the level of September 2003, from 5.7 percent the prior month.

The Bank of Canada left its benchmark interest rate unchanged Sept. 3 at 3 percent. The rate is ``appropriately accommodative,'' while inflationary pressures ``remain elevated,'' the central bank said.

Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.10 against the U.S. dollar by the end of 2009, according to the median forecast of economists surveyed by Bloomberg.

The yield on the two-year Canadian government bond was little changed at 2.68 percent. The price of the 3.75 percent security due in June 2010 rose 1 cent to C$100.15.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net