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Economy

US Dollar rises as oil drop hits crude-linked currencies

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(Revises throughout, updates prices, adds action in Canadian dollar, emerging markets)

By David Henry

NEW YORK (Reuters) – The dollar rose on Tuesday as interest rates in the United States moved in a tight range and a drop in oil prices hit crude-linked currencies.

After touching its lowest level in nearly seven weeks, the dollar index against major currencies rose 0.2% to 91.204 in the afternoon in New York.

The euro was flat at $1.2033 after rising nearly 0.4% on the outlook for increasing vaccinations. The British pound fell 0.4% to $1.3937 after it backed off from touching $1.40 and gaining 1% on Monday.

The dollar has fallen in April as U.S. bond yields retreated from the 14-month highs of 1.776% reached last month. The currency and yield declines have come as evidence mounted that the Federal Reserve would be slower about tightening monetary policy than it had appeared to the market, analysts said.

The 10-year Treasury yield slipped to 1.57% after trading in a narrow range around 1.60%.

The currency and interest rate markets could be relatively calm for another few weeks as the Fed and the European Central Bank each take their time about adjusting their rate policies, said Mazen Issa, senior currency strategist at TD Securities.

“There really isn’t a strong catalyst in either direction this month to really break us out of ranges,” Issa said.

Some encouragement for the euro came from the announcement that the European Union has secured an additional 100 million doses of the COVID-19 vaccine produced by BioNTech and Pfizer.

The vaccination news suggests that the pace of Europe’s recovery from the pandemic will begin to catch up with the United States and its story of faster growth, Issa said.

The FX market is moving away from this idea of full-on U.S. exceptionalism to being in a little bit more in limbo now,” he said.

Against the Japanese yen, the dollar edged up to 108.09 after having broken below 108 for the first time since March 5.

Oil-linked currencies took a hit when crude prices fell 1% on fears that surging coronavirus infections in India will bring restrictions and reduce demand for oil.

The Canadian dollar, which had been steady ahead of a Wednesday meeting of the Bank of Canada, then weakened the most in nearly two months to 1.2620 against the dollar, or 79.24 U.S. cents. The Norwegian crown retreated from its strongest levels against the dollar since 2018.

Mexico’s peso also weakened with oil after hovering around three-month highs on the strength of carry trades in high-yield emerging market currencies bolstered by recent low volatility.

Bitcoin rose 1% to $56,211 on Tuesday afternoon.

 

 

(Reporting by David Henry in New York. Additional reporting by Elizabeth Howcroft, Hideyuki Sano and Kevin Buckland; Editing by Larry King, Steve Orlofsky, Alex Richardson and Dan Grebler)

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Economy

Canada posts hefty job losses in April as third wave bites

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By Julie Gordon

OTTAWA (Reuters) –Canada lost more jobs than expected in April as fresh restrictions to contain a variant-driven third wave of COVID-19 weighed on employers, Statistics Canada data showed on Friday.

Some 207,100 jobs were lost in April, more than the average analyst prediction for a loss of 175,000. The unemployment rate climbed to 8.1%, missing analyst expectations of 7.8%. Employment is now 2.6% below pre-pandemic levels.

“This episode seemed to be a little more impactful in that it led to a big decline in full-time jobs and specifically in private-sector employment,” said Doug Porter, chief economist at BMO Capital Markets.

“There were some heavy hits in education and culture and recreation. So it seems like the third wave bit into other sectors a little bit more deeply than the second wave.”

Full-time employment was down by 129,400 while part-time employment fell by 77,800 positions.

With many retailers shuttered in April and the restrictions also hitting hotels, food services and entertainment, service sector employment plunged by 195,400 jobs. Employment in the goods sector fell by 11,800.

As COVID-19 infections surged in April, a number of Canadian provinces imposed fresh restrictions, including shuttering or limiting non-essential businesses and closing schools. Cases are beginning to decline, but reopening is still weeks away and economists expect further job losses in May.

Canada has so far fully vaccinated just over 3% of its nearly 38 million residents, while more than 36% have received a first dose. By the end of June, Canada expects to have received 40 million doses.

Long-term unemployment increased by 4.6% to 486,000 people, which suggests some labor market scarring is beginning to show, said Leah Nord, a senior director at the Canadian Chamber of Commerce.

“The job prospects for displaced workers grow slimmer with every month in lockdown as more businesses throw in the towel,” she said in a statement.

Total hours worked fell 2.7% in April, while the number of people working less than half their usual hours jumped 27.2% to 288,000.

“The hours worked numbers were I think weaker than had been expected,” said Andrew Kelvin, chief Canada strategists at TD Securities. “I think it suggests a weaker April than the Bank of Canada would have had penciled in.”

The Bank of Canada in April sharply boosted its outlook for the Canadian economy and signaled interest rates could start to rise in 2022.

The Canadian dollar was trading 0.3% lower at 1.2187 to the greenback, or 82.05 U.S. cents, after touching on Thursday its strongest level in 3-1/2 years at 1.2141.

(Reporting by Julie Gordon in Ottawa; additional reporting by Steve Scherer, Fergal Smith and Nichola Saminather, Editing by Hugh Lawson, Mark Heinrich and Nick Zieminski)

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Economy

Ivey PMI shows activity expanding at a slower pace in April

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TORONTO (Reuters) – Canadian economic activity expanded in April but the pace slowed from a 10-year high the previous month, Ivey Purchasing Managers Index (PMI) data showed on Friday.

The seasonally adjusted index fell to 60.6 from 72.9 in March. The March reading was the highest since March 2011 and the second highest since the PMI was launched in 2000.

Economic restrictions were tightened in some Canadian provinces in April to tackle a third wave of the coronavirus pandemic.

The Ivey PMI measures the month-to-month variation in economic activity as indicated by a panel of purchasing managers in the public and private sectors from across Canada. A reading above 50 indicates an increase in activity.

The gauge of employment fell to an adjusted 58.0 from 62.7 in March, while the supplier deliveries index was at 37.8, down from 39.6, indicating companies are having greater difficulty meeting increased demand.

The unadjusted PMI fell to 59.9 from 67.3.

 

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)

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Economy

Canadian dollar rises for sixth straight week despite jobs decline

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar was little changed against the greenback on Friday as jobs data for both Canada and the United States fell short of estimates, with the loonie holding near its strongest level in 3-1/2 years and extending a weekly win streak.

Canada lost 207,100 jobs in April as fresh restrictions to contain a variant-driven third wave of COVID-19 weighed on employers, Statistics Canada data showed. Analysts had forecast a decline of 175,000.

In the United States, data for the same month showed employers hiring far fewer workers than expected, likely frustrated by labor shortages.

“You have this unhealthy environment where growth goals are struggling to be met but unfortunately inflation is picking up everywhere,” said Avi Hooper, a senior portfolio manager at Invesco.

Supportive of the loonie, one cause of inflation has been a surge in the prices of some of the commodities that Canada produces.

Copper surged to a record peak on Friday, fueled by speculators and industrial buyers as Western economies recover from the pandemic, while oil settled 0.3% higher at $64.90 a barrel.

“A higher oil price from current levels, we think, will be the catalyst for the next leg of Canadian dollar strength,” Hooper said.

The loonie was nearly unchanged at 1.2145 to the greenback, or 82.34 U.S. cents, having touched its strongest intraday level since September 2017 at 1.2125. For the week, it was up 1.2%, its sixth straight weekly advance.

The currency has been on a tear since the Bank of Canada last month signaled it could begin hiking interest rates in late 2022 and cut the pace of its bond purchases.

Canadian government bond yields fell across the curve. The 5-year touched its lowest since March 5 at 0.841% before bouncing to 0.878%, down 3.8 basis points on the day.

 

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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