TORONTO (Reuters) - The Canadian dollar strengthened to a near three-month high against the greenback on Friday and was up more than 2% for the week after data showing a surprise rebound in domestic and U.S. jobs supported investor optimism about economic recovery.
Canada’s economy gained 290,000 jobs in May, a rise of 1.8% from April, surprising economists who had forecast that record-breaking job declines over recent months would continue.
The United States, Canada’s largest trading partner, also posted surprise gains for May, while shares on Wall Street climbed about 2.5%.
Despite the large Canadian jobs gain and the potential for another increase in June as easing of restrictions becomes more widespread across the country, investors doubt the Bank of Canada will be scaling back its support for the economy any time soon.
“Given this one data point, I don’t think it is enough to move the needle for the Bank of Canada,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. “You have a big hole (for the economy) to crawl out of.”
Canadian purchasing activity contracted in May but at a less sharp rate than in the record-setting prior month, Ivey Purchasing Managers Index (PMI) data showed.
The Canadian dollar was trading 0.5% higher at 1.3431 to the greenback, or 74.45 U.S. cents. The currency, which was up 2.5% for the week, touched its strongest intraday level since March 6 at 1.3391.
The gain for the loonie came as oil, one of Canada’s major exports, rallied. U.S. crude oil futures settled 5.7% higher at $39.55 a barrel after the Organization of the Petroleum Exporting Countries decided to move up discussions on whether to extend record production cuts to Saturday.
Canadian government bond yields were higher across the curve. The 10-year rose 5.7 basis points to 0.736%, its highest since April 14.
Reporting by Fergal Smith; editing by Jonathan Oatis and Richard Chang
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