* C$ ends at C$1.0294 to US$, or 97.14 U.S. cents
* Canada trade deficit narrows while U.S. gap widens
* Jobs data on Friday eyed for direction
By Alastair Sharp
TORONTO, March 7 The Canadian dollar
strengthened against the U.S. dollar on Thursday after data
showed Canada's trade deficit narrowed in January as exports
grew at a faster rate than imports.
The currency also benefited from the greenback's fall versus
the euro after European Central Bank President Mario Draghi gave
no indication the bank would cut euro-zone interest rates
"Dollar/Canada moved on the coattails of the euro movement,"
said Matt Perrier, a managing director of foreign exchange sales
at BMO Capital Markets.
The loonie, as Canada's currency is known colloquially, has
weakened sharply in recent weeks to trade above C$1.03 to the
U.S. dollar after changing hands at equal value in mid-February.
It closed at C$1.0294 to the greenback, or 97.14
U.S. cents, on Thursday, after ending Wednesday's North American
session at C$1.0315.
In the cross against the euro, Canada's currency
weakened to above C$1.35 at one point, a full Canadian cent
softer than Wednesday's close.
The Canadian trade data compared favorably with a widening
trade deficit in the United States, Canada's largest trading
partner by far.
"The combination of data points, if you look at the two
trade balances, did favor a softening in dollar/CAD," said
Jeremy Stretch, head of foreign exchange strategy at CIBC World
Markets in London.
But he said he doubted the loonie's ability to sustain
Many currency strategists have turned more bearish on the
Canadian dollar in recent weeks, concerned by data showing a
cooling housing market and slower growth.
Toronto-Dominion Bank on Thursday slashed its forecasts for
the loonie by several cents across the coming quarters.
Canada's No. 2 bank cited slowing Canadian growth, increased
slack in the economy and tepid inflation for the forecast
changes. It said the Bank of Canada is now likely to hold off on
a rate hike until the end of 2014.
Still, a Reuters poll on Wednesday showed forecasters expect
the Canadian dollar will recover some of its early 2013 losses
and trade at equal value against its U.S. counterpart by the end
of this year.
If North American jobs data due out on Friday diverge
drastically - with U.S. numbers buoyant and Canadian tepid - the
loonie could head towards its weakest 2012 level of around
C$1.0450, CIBC'S Stretch said.
Forecasters predict a gain of 8,000 jobs in Canada for
"We will get a reaction if it's a big swing one way or the
other, particularly if we get another number like last month,"
Perrier said, referring to a loss of about 22,000 jobs in Canada
Canadian government bond prices were lower across the curve,
with the two-year bond off 5 Canadian cents to yield
0.958 percent, while the benchmark 10-year bond fell
31 Canadian cents to yield 1.883 percent.