*
Canadian dollar strengthens 1.2% against the greenback
*
Touches its strongest since April 18 at 1.3372
*
Canada adds 41,400 jobs in April
*
Canadian bond yields rise across flatter curve
(Adds details on activity; updates prices)
By Fergal Smith
TORONTO, May 5 (Reuters) - The Canadian dollar
strengthened to a two-week high against its U.S. counterpart on
Friday, as investors dialed back bets for interest rate cuts by
the Bank of Canada in the coming months following
stronger-than-expected domestic jobs data.
The loonie was trading 1.2% higher at 1.3372 to the
greenback, or 74.78 U.S. cents, its biggest gain since Jan. 4
and its strongest level since April 18. For the week, it was up
1.3%.
The Canadian economy gained 41,400 jobs in April, exceeding
expectations for an increase of 20,000, while the jobless rate
stayed near a record low.
"Another blockbuster Canadian jobs number," said Karl
Schamotta, chief market strategist at Corpay.
"It smashed expectations and pointed to resilience in the
underlying economy, and will almost certainly narrow interest
rate differentials against the U.S. on the front of the curve by
lowering the likelihood of rate cuts by the Bank of Canada and
pushing those into 2024 at the earliest."
Money markets are still expecting an interest rate cut by
the BoC this year, but chances of a cut as soon as October fell
to about 30% from 70% before the data. On Thursday, BoC Governor Tiff Macklem said that the bank is
ready to tighten further if Canadian inflation gets stuck
significantly above target. The bank's benchmark rate has been
on hold at a 15-year high of 4.50% since January.
U.S. job growth also beat expectations in April. Canada sends about 75% of its exports to the United States, including oil. The price of oil settled 4.1% higher at $71.34 a barrel, clawing back some recent declines. Canadian government bond yields were higher across a flatter curve. The 2-year rose 16.1 basis points to 3.728%, while the 10-year was up 12.3 basis points at 2.923%. (Reporting by Fergal Smith; editing by Jonathan Oatis and Sandra Maler)
