Canadian Dollar Falls as Employers Shed Jobs for Second Month

By Jamie McGee and Chris Fournier

Jan. 9 (Bloomberg) -- Canada’s dollar declined as a government report showed employers eliminated jobs for a second month, strengthening the case for the Bank of Canada to lower borrowing costs further.

“There is a steady pace of job declines,” said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal. “We all await the U.S. numbers now.”

The U.S. probably lost 525,000 jobs in December, capping the biggest collapse in employment since the end of World War II, economists said before a report today. The U.S. buys about 80 percent of Canada’s exports.

Canada’s dollar fell 0.5 percent to C$1.1856 per U.S. dollar at 7:30 a.m. in Toronto, from $1.1797 yesterday. One Canadian dollar buys 84.34 U.S. cents. The currency dropped 18 percent in 2008 as the global recession reduced export demand.

Employers eliminated a net 34,400 workers last month after a loss of 70,600 in November. The median forecast of 22 economists surveyed by Bloomberg News was for a decrease of 20,000. The unemployment rate increased to 6.6 percent from 6.3 percent in the prior month.

The Canadian dollar will weaken to C$1.28 in the first quarter of 2009, according to the median forecast of 37 economists surveyed by Bloomberg News.

The Bank of Canada lowered its overnight lending rate six times since the end of 2007, reducing it by 0.75 percentage point to 1.5 percent on Dec. 9. The central bank’s next meeting is scheduled for Jan. 20.

The yield on the two-year government bond fell three basis points, or 0.03 percentage point, to 1.11 percent. The price of the 2.75 percent security due in December 2010 rose 5 cents to C$103.04.

To contact the reporters on this story: Jamie McGee in New York at jmcgee8@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net