Canadian Dollar Falls to 2-Week Low on ‘Shocking’ Job Numbers

By Whitney Kisling and Chris Fournier

Feb. 6 (Bloomberg) -- Canada’s dollar declined to the lowest in two weeks as a government report showed employers cut 129,000 jobs in January, fueling concern that the country’s economy is deteriorating.

“A shocker,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “There’s little that one can take from this data to lend any material support for the Canadian dollar in the short term.”

Canada’s dollar fell 1.5 percent to C$1.2512 per U.S. dollar at 7:46 a.m. in Toronto, from $1.2323 yesterday. It touched C$1.2650 on Jan. 23. One Canadian dollar buys 79.92 U.S. cents. The currency dropped 18 percent in 2008 as the global recession reduced export demand.

The monthly job losses were the largest since the methodology of the employment survey was last changed in 1976, Statistics Canada said today in Ottawa. The jobless rate rose to 7.2 percent, a four-year high, from 6.6 percent in December. Economists surveyed by Bloomberg anticipated that employers would cut 40,000 positions, the median forecast.

Canada’s Finance Minister Jim Flaherty yesterday warned that today’s employment data would likely be “regrettable,” and suggested the government may need to implement another stimulus package because the economy is deteriorating.

Forecasts

“The numbers were shocking, even with the warning yesterday,” said Steven Butler, director of foreign-exchange trading in Toronto at Scotia Capital, a unit of Canada’s third- largest bank. “This will clearly add a lot of pressure to the Canadian dollar.”

Canada’s dollar will weaken to C$1.28, then C$1.30, Butler said.

“It’s not bad to buy the Canadian dollar again” as it sinks to C$1.27 to C$1.28, said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal. “But be patient. You will get better levels to buy.”

The Bank of Canada lowered its overnight lending rate seven times since the end of 2007, reducing it by 50 basis points to 1 percent on Jan. 20. The central bank’s next meeting is scheduled for March 3.

“A weak number cements the view that the economy is truly bad enough to justify further easing,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report was released. Further easing is “a net weakening factor for the Canadian dollar.”

The U.S. unemployment rate rose to 7.5 percent from 7.2 percent, according to a Bloomberg survey of analysts before the government report at 8:30 a.m. today.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net.