C$ weakens to a 3-day low on lower oil, U.S. jobs data

TORONTO (Reuters) - The Canadian dollar weakened to a three-day low against its U.S. counterpart on Friday as crude oil prices slumped and after stronger-than-expected U.S. jobs data.

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Ruble pictured in Warsaw January 26, 2011. REUTERS/Kacper Pempel

U.S. crude CLc1 prices were down 3.68 percent to $36.93 a barrel after Saudi Arabia said it will freeze its oil output only if Iran and other major producers do so. [O/R]

The U.S. dollar extended its gains against the loonie after the release of solid U.S. employment data that could allow a cautious Federal Reserve to gradually raise interest rates this year.

At 9:23 a.m. EDT, the Canadian dollar CAD=D4 was trading at C$1.3101 to the greenback, or 76.33 U.S. cents, much weaker than Thursday's close of C$1.2987, or 77.00 U.S. cents.

The currency’s strongest level of the session was C$1.2969, while it touched its weakest since at March 29 at C$1.3134.

However, the loonie ended the first quarter 6.5 percent higher than at the end of 2015.

It touched a 5-1/2-month high at C$1.2859 on Thursday after monthly gross domestic product (GDP) data showed the economy grew by a much larger-than-expected 0.6 percent in January, further denting expectations for a for a Bank of Canada rate cut.

The data has led to reassessment by analysts of Canada’s growth outlook.

BMO Capital Markets has “more than doubled” its first-quarter growth projection to an annualized 3.3 percent after the January GDP data, according to a research note on Friday, much faster than the Bank of Canada’s 1 percent estimate.

Canada plans to stick with major investment plans included in last week’s budget, regardless of the level of the Canadian dollar or a pick-up in short-run growth, Finance Minister Bill Morneau said.

Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR price down 0.5 Canadian cents to yield 0.542 percent and the benchmark 10-year CA10YT=RR falling 12 Canadian cents to yield 1.238 percent.

Spreads versus Treasuries were mixed as the U.S. Treasury curve flattened following the U.S. jobs data.

The Canada-U.S. two-year bond spread was 2.6 basis points more negative at -22 basis points. But the 10-year spread narrowed 2.6 basis points to -53.3 basis points, its least negative since Oct. 20, as Treasuries outperformed at the long-end.

The Bank of Canada will release its business outlook survey at 10:30 a.m. EDT.

Reporting by Fergal Smith Editing by W Simon