Surprise optimism in the Bank of Canada

The Canadian dollar rose to new 12-month-plus highs Friday, as the currency's recent momentum was augmented by unexpectedly strong September employment figures and surprise optimism in the Bank of Canada's most recent business outlook survey. The U.S. dollar was trading at C$1.0428 at 3:39 p.m. EDT (1939 GMT), from C$1.0439 at 8:00 a.m. EDT (1200 GMT) and C$1.0510 late Thursday. The Canadian dollar rallied to new 2009 highs in the immediate wake of early news that the Canadian economy created a net total of 30,000 jobs in September, considerably stronger than the 5,000 expected by analysts and modestly better than the 27,500 jobs gained in August. The nation's unemployment rate also moved down to 8.4% from 8.7% in August. The currency then extended its gains to the brink of the C$1.0400 figure following the release of the central bank's outlook survey for the third quarter, which revealed firms facing easier credit conditions for the first time in two years and expressing much greater optimism regarding future sales prospects. The Canadian dollar's intraday high at C$1.0411 Friday was its strongest level since Sept. 29 of last year, according to EBS via CQG. The currency also vastly outperformed most other widely-traded currencies Friday as the U.S. dollar staged a week-ending rally, a divergence in performance that contributes to a generally optimistic tone for the Canadian dollar into next week and the potential for follow-on gains closer to the parity level with the U.S. dollar. "People are buying riskier assets, the high-yielding currencies are attractive, the carry trade is back on, and the U.S. dollar is being used as a funding currency," said chief currency strategist Shaun Osborne of TD Securities in Toronto. "It all points, I think, to quite a bit more outperformance for the Canadian dollar, even in the very short-term." Canadian financial markets will be closed Monday for Canada's Thanksgiving Day holiday. These are the exchange rates at 3:39 p.m. EDT (1939 GMT), 8:00 a.m. EDT (1200 GMT), and late Thursday. USD/CAD 1.0428 1.0439 1.0510
EUR/CAD 1.5351 1.5404 1.5551
CAD/JPY 86.15 85.01 84.18