By Chris Fournier
Nov. 8 (Bloomberg) -- Canada's dollar outperformed the world's most-actively traded currencies as the eighth-largest economy unexpectedly added jobs last month and looked poised to withstand a global economic slowdown.
The Canadian dollar, dubbed the loonie for the aquatic bird on the one-dollar coin, rose 2 percent this week against its U.S. counterpart. The International Monetary Fund predicted all of the Group of Seven economies will contract next year except Canada's.
``The ability of the Canadian economy to continue to generate jobs is truly outstanding and astounding,'' said Andrew Busch, a currency strategist at BMO Capital Markets in Chicago. ``The Canadian financial architecture has been so much better than the rest of the world. It certainly has been a contributing factor to why the Canadian dollar has performed well recently.''
The Canadian dollar rose to C$1.1893 per U.S. dollar, from C$1.2125 on Oct. 31. One Canadian dollar buys 84.08 U.S. cents.
Canada's economy added 9,500 jobs last month after a gain of 106,900 positions in September, Statistics Canada said yesterday in Ottawa. The median forecast of 21 economists surveyed by Bloomberg News was for a decrease of 10,000 in October.
`Dial Down the Pressure'
Canada's employment data ``will also dial down the pressure on the Bank of Canada to cut rates even more aggressively,'' Doug Porter, deputy chief economist with BMO Capital Markets in Toronto, wrote in a note to clients.
The central bank cut borrowing costs six times in the past 12 months, lowering its overnight rate to 2.25 percent from 4.5 percent. Policy makers next meet Dec. 9.
Canada's dollar has rebounded 7.1 percent since Oct. 28, when it touched C$1.3017, the weakest in more than four years.
``Early in the week we saw commodity currencies doing quite well alongside strong equity markets,'' said Stephen Malyon, co- head of currency strategy in Toronto at Scotia Capital Inc., a unit of Canada's third-largest bank. ``We may have averted the worst-case scenario, but it's far too late to avoid a protracted economic slowdown.''
Malyon said he ``wouldn't be terribly shocked'' to see the Canadian dollar slip back to C$1.30. Busch predicted the loonie would trade between C$1.15 and C$1.30 this quarter and could finish the year at about C$1.235.
The MSCI World Index, a gauge of stocks in 23 developed nations, climbed 5 percent in the first two days of the week. The central bank's Commodity Price Index rose 1.9 percent this week.
Meeting in Washington
World leaders meeting in Washington next week will discuss ways of reviving the global economy on top of holding talks on financial regulation, an aide to Canadian Prime Minister Stephen Harper said.
The U.S. is hosting the economic summit in Washington on Nov. 14 and Nov. 15 to discuss the causes of the financial crisis and review progress made in addressing them.
Crude prices have sunk 59 percent since reaching a record $147.27 a barrel on July 11. Canada's dollar has depreciated 15.1 percent since then. Oil accounts for a tenth of the nation's exports.
Canada's government will release housing starts and manufacturing data next week.
Canadian oil-sands developers are cutting investment plans by 20 percent after a slew of delayed projects, an official at the main trade group for Canada's oil producers said in an interview.
Oil must be at $60 a barrel for oil-sands projects completed after 2001 to be viable, RBC Capital Markets senior currency strategist Matthew Strauss wrote in a Nov. 4 report. It traded at $61.06 yesterday.
The yield on Canada's two-year government bond fell 11 basis points, or 0.11 percentage point, in the week to 1.91 percent. It touched 1.89 percent on Nov. 6, the lowest since at least 1989 when Bloomberg records begin. The price of the 2.75 percent security due in December 2010 climbed 20 cents to C$101.69.
The 10-year note's yield dropped 5 basis points to 3.71 percent during the period. The price of the 4.25 percent security maturing in June 2018 rose 33 cents to C$104.28.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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