C$ rebounds as investors stick to BoC rate hike bets

TORONTO (Reuters) – The Canadian dollar rallied against the greenback on Monday, recovering from a one-week low on Friday, as investors bet that weak domestic jobs data would not derail the start of the Bank of Canada’s interest rate hikes.

The Canadian economy lost more jobs than expected in January as the Omicron-driven COVID-19 wave peaked, data showed on Friday, but analysts expect a quick rebound in coming months.

Money markets expect the Canadian central bank to begin hiking interest rates at its next policy announcement on March 2 and to raise borrowing costs a total of six times this year.

Bank of Canada Governor Tiff Macklem is due to speak on Wednesday on the evolution of Canadian business, which could offer further clues on the interest rate outlook.

Net long positions in the commodity-linked Canadian dollar had increased to 18,264 contracts as of Feb. 1 from 12,317 in the prior week, data from the U.S. Commodity Futures Trading Commission showed on Friday.

The currency was up 0.4% on Monday at 1.2717 to the greenback, or 78.63 U.S. cents, after trading in a range of 1.2703 to 1.2762. On Friday, it touched its weakest intraday level since Jan. 28 at 1.2787.

Global stocks edged higher after unexpectedly strong U.S. jobs data soothed concerns about the global economy.

The price of oil, one of Canada’s major exports, fell as signs of progress in the U.S.-Iran nuclear talks that could lead to removal of U.S. sanctions on Iranian oil sales offset concerns about the tight supplies.

U.S. crude prices were down 0.6% at $91.79 a barrel.

Canadian government bond yields were mixed across the curve, with the 10-year up less than half a basis point at 1.860%. On Friday, it touched its highest intraday level in more than two weeks at 1.877%.

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