TORONTO, Oct 9 (Reuters) - The Canadian dollar weakened to an 18-month low against its US counterpart on Friday as domestic data showed a surprise drop in employment, reducing expectations for a Bank of Canada interest rate hike this month.
The loonie was trading 0.4% lower at 1.4275 per US dollar, or 70.05 US cents, after touching its weakest intraday level since April 2025 at 1.4298. For the week, the currency was down 0.2%, putting it on track for its fifth straight weekly decline.
Canada's economy shed 68,300 jobs in September, while the unemployment rate edged up to 6.5% from 6.4% in August. Economists had forecast an increase of 9,200 jobs.
"A second consecutive month of sizable job losses washes away the surprising strength reported in Canada's job market through the early summer, and leaves employment up a so-so 0.5% from a year ago," Douglas Porter, chief economist at BMO Capital Markets, said in a note.
"We continue to believe that the appropriate stance by the Bank of Canada is watchful waiting, particularly so with employment suddenly clouding over," Porter said.
The BoC has said it is prepared to raise borrowing costs multiple times if inflation remained too high but it has also worried that new US tariffs had increased uncertainty around the sustainability of Canada's economic rebound.
Investors see a 25% chance the central bank raises its benchmark interest rate on October 28, down from 40% before the employment report.
The US dollar rose against a basket of major currencies as oil prices recovered from session lows. US crude oil futures were trading 0.3% lower at $91.19 a barrel.
Canadian government bond yields moved lower across the curve, with the market set to close early ahead of the Thanksgiving Day holiday on Monday.
The 2-year was down 6.8 basis points at 3.183%, falling 10.9 basis points further below the equivalent US rate to a gap of about 161 basis points, its widest since February 2025.
Reporting by Fergal Smith; editing by David Gaffen
