TORONTO - The loonie shook off early losses and moved higher following a much better than expected employment report from Canada's biggest trading partner.
The Canadian currency rose 0.6 of a cent to 100.64 cents US, reflecting optimism that progress in a U.S. recovery will act to boost the Canadian economy.
The U.S. Labour Department reported that the economy created 243,000 jobs last month, far higher than the 150,000 jobs that economists had expected. Also, the unemployment rate fell 0.2 of a percentage point to 8.3 per cent.
The loonie had earlier fallen as low as 99.67 cents US after Statistics Canada reported that the domestic economy created only 2,300 jobs last month, a far cry from the 25,000 that economists had expected. The unemployment rate climbed one notch to 7.6 per cent as more people looked for work.
But traders were pleased to see the American economy gain traction, since an improving U.S. economy has positive spinoffs in Canada.
"Even though the Statistics Canada report was quite disappointing for the Canadian backdrop, markets are forward looking," said Camilla Sutton, chief currency strategist with Scotia Capital.
"They look to the U.S. side and see an improvement in employment there and then factor that forward into the future that's likely a positive for the Canadian economy and therefore positive for the Canadian dollar."
Commodity prices improved as the American jobs report raised hopes for higher demand with the March crude contract on the New York Mercantile Exchange up $1.48 to US$97.84 a barrel. Prices had softened since Wednesday when data showed a much larger than expected increase in U.S. crude inventories last week.
The April copper contract was up 12 cents to US$3.90 a pound.
However, bullion prices declined with the April contract down $19 to US$1,740.30 an ounce as the American jobs data encouraged investors to buy into riskier assets.
Meanwhile, there was further evidence that the 17-nation eurozone is heading for recession.
Eurostat, the EU's statistics office, said retail sales dropped 0.4 per cent during January, in contrast to expectations for an increase of the same amount.
The December data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.