Canada's dollar traded above par with the U.S. currency on Friday for the first time in more than two months as markets welcomed a U.S. jobs report that showed signs of a stronger economy.
The currency climbed as high as C$0.9980 to the greenback, or $1.0020, its strongest level since May 11, after the U.S. data was released.
U.S. nonfarm payrolls rose 163,000 last month, beating economists' expectations for a 100,000 gain. The report was dimmed somewhat, however, by an increase in the jobless rate to 8.3% from June's 8.2%, even as more people gave up the search for work.
Still, the stronger-than-expected jobs growth suggested the economy of Canada's largest trading partner continues to expand.
"The argument behind the move today is much more fundamental in that if the U.S. economy is picking up jobs at a decent pace then ultimately it's going to reflect itself in a stronger economy, which is being priced into equity valuations," said Jack Spitz, managing director of foreign exchange at National Financial Bank, noting Friday's rally on global stock markets.
At the same time, some think the higher jobless rate could pressure the U.S. Federal Reserve to try to boost the economy with a third round of bond purchases.
"That's got investors thinking we'll see the Fed stepping in later in the year to provide stimulus, so that's increasing risk appetite and weakening the U.S. dollar across the board," said Darren Richardson, a senior corporate dealer at CanadianForex.
The Fed this week stopped short of offering new monetary stimulus even as it signaled further bond buys could be in store.
The Canadian dollar ended the day off its high at C$1.0019 against the greenback, or 99.81 U.S. cents, up from Thursday's North American finish of C$1.0072, or 99.29 U.S. cents.
NEAR RECORD HIGH AGAINST EURO
Against the euro, the Canadian dollar traded at C$1.2390, pulling back from the record high of C$1.2189, or 82.04 euro cents, which it hit on Thursday after the European Central Bank (ECB) failed to offer new stimulus measures.
"Even though the ECB didn't really change their stance yesterday, the market is still clinging to the hope of the ECB taking action, combined with the Fed later in the year," Richardson said.
The jump in appetite for riskier assets on Friday hurt Canadian government bond prices. Canada's two-year bond retreated 12 Canadian cents to yield 1.12%, and the benchmark 10-year bond dropped 92 Canadian cents to yield 1.77%.