Canadian Dollar Tumbles On Jobs Data

Posted November 06, 2009

The Canadian dollar fell as both US and Canadian job loss numbers rise. The US dollar rose against the euro as investors seek safe haven assets. The Mexican peso continued to slide in response to the US unemployment figures.


Canada’s dollar was heading the news yesterday as the currency tumbled on jobless numbers. Both Canada and the US issued reports this week that showed increasing numbers of unemployed and far beyond what analysts expected.

Canada lost 43,200 jobs in October. The US lost another 190,000 jobs in October. The US unemployment rate is now at 10.2 percent which is a 26 year high rate. The Canadian unemployment rate has now reached 8.6 percent. The condition of the US economy has a direct bearing on the Canadian economy of course because of the Canadian export market.

The Canadian dollar weakened to C$1.0753 by the end of the day yesterday or 93.00 US cents. This was down from 93.83 US cents. The Canadian dollar fell .6 percent for the week.

Both the Canadian and the US economies are struggling to keep a forward momentum. The  recovery is coming in fits and starts and that is keeping a lot of uncertainty in the markets. The G-20 is meeting in Scotland and one of the topics to be discussed is the possibility there are new asset bubbles forming and one those bubbles is in the stock market. The currency and equity markets are volatile and on many days are still not performing in normal fashion as investors try to lock in profits as market swing.

The currency markets are now dealing with the fact that interest rates are going to be held low for many more months. The rise in unemployment in Canada was not expected.  Making matters worse is the drop in oil prices. Oil is one of Canada’s primary exports and the price is now at $76.71 per barrel.

The US dollar rose against half of the major global currencies as the unemployment numbers were released as uneasy investors turned to safe haven assets. As has been said a number of times, there cannot be a full economic recovery as long as unemployment continues to rise. It is clear that the recession is not over despite signs of life in certain sectors.

The US dollar rose against the euro to $1.4841. The yen rose against the US dollar to 89.90 yen. The euro weakened to 133.56 yen.

Mexico’s peso fell on the combination of rising US unemployment and Mexico’s inability to close its 2010 deficit. The peso fell to 13.4098 pesos per dollar which makes a 1.6 percent decline for the week. Mexico’s economy is closely tied to the US economy and signs the US recovery is not doing well is bad news for Mexico. Eighty percent of Mexico’s exports are purchased by the US.

Mexico is working to close its budget gap for 2010 while also hoping to prevent another credit rating downgrade. This could send Mexico into another economic crisis. Also hurting Mexico’s economy is the drop in oil production.

The Czech koruna rose against the euro to 25.783 koruna per euro. This means the koruna rose by 4 percent for the week. The Czech economy reported it had a trade surplus in September which is the ninth straight month a surplus has been recorded. The central bank voted yesterday to keep the benchmark interest rate at 1.25 percent.

Poland’s zloty also rose and was at 4.2542 zlotys per euro. The Hungarian forint strengthened to 275.0 forints per euro.