Dollar heads for weekly fall; loonie retreats

NEW YORK (Aug 9)  The Canadian dollar took over the forex spotlight Friday, retreating sharply from earlier gains after a disappointing jobs report, while its U.S counterpart saw small gains versus most major rivals as traders continued to debate when the Federal Reserve will begin to slow the flow of monetary stimulus.

The U.S. unit fetched 1.0309 Canadian dollars  in recent action, a loss of 0.1% from Thursday but up from a low of C$1.0287 seen ahead of data that showed Canada unexpectedly lost 39,400 jobs in July, the second consecutive decline and the biggest since March.

The dollar traded as high as C$1.0351 versus the loonie in the wake of the data.

Analysts were looking for a rise of around 10,000.

“This report also confirms last week’s U.S. nonfarm payrolls disappointment in suggesting that employment trends in North America may not be as strong as had been thought until recently,” said Colin Cieszynski, senior market analyst at CMC Markets.

Meanwhile, the ICE dollar index, which tracks the U.S. currency’s movement against six rivals, traded at 81.131, compared with 81.028 late Thursday, leaving it on track for a weekly decline of around 1%.

“As we end the week, it looks as though dollar weakness is set to persist, as U.S. yields remain susceptible to downside risks,” said Jeremy Stretch, currency strategist at CIBC in London.

The WSJ Dollar Index, which uses a slightly wider comparison basket, fell to 73.26 from 73.36, marking a 1.5% setback from a week ago.

The dollar has remained under pressure since last Friday’s report that the U.S. economy created a less-than-expected 162,000 jobs in July. This added uncertainty as to when the Federal Reserve will start slowing the pace of asset purchases that some consider to be a weight on the value of the greenback.

The dollar didn’t find much support after a number of Fed officials this week said tapering of bond purchases looked likely to occur by the end of the year. The U.S. unit also declined along with U.S. Treasury yields, as the bond market ran into technical factors that have pushed yields lower.

“We need to see evidence of continued data gains to back … assumptions” the Fed will begin to taper as early as September, Stretch said. This presents a problem given a light economic-data calendar Friday and over coming days, Stretch added, noting that the news flow is set to pick up next week with retail-sales figures and forward-looking manufacturing-sentiment data.

“Until then, aside from any late-week consolidation moves, the dollar appears set to remain on the defensive,” Stretch said, with only a weekly close above the ICE 81.15 level capable of unwinding fears of a slide back toward the June lows.

The euro and the British pound on Friday hovered near multiweek highs against the greenback, while the Australian dollar extended gains following largely upbeat economic reports from China, Australia’s largest export market.

The euro on Friday slipped to $1.3360 from a level of $1.3384 late Thursday, while the British pound  edged down to $1.5529 versus Thursday’s level of $1.5537. But each currency hit highs not seen in seven weeks after a batch of encouraging European data this week, including stronger-than-expected manufacturing orders in Germany and the strongest growth in U.K. industrial production since 2010.

PMI readings and other recent sentiment indicators “currently point to a switch from negative to positive gross-domestic-product growth in the third quarter,” Handelsbanken head of macro research Jan Häggström told clients this week.