Canadian dollar lower in wake of weak jobs data, Scottish independence concerns

TORONTO – The Canadian dollar closed sharply lower Monday as the American currency appreciated in the wake of Friday’s soft U.S. jobs report and concern increased on the markets over how the Scottish referendum on independence may turn out.

The loonie was down 0.77 of a cent to 91.13 cents US after data released Friday raised another round of speculation about when the U.S. Federal Reserve may hike interest rates. Markets generally expect the Fed to move around the middle of 2015.

U.S. employers added just 142,000 jobs in August. The data was also disappointing in Canada as 11,000 jobs were lost in August.

Traders sharpened their focus on the United Kingdom after a YouGov poll showed rising support for Scottish independence. The British pound dropped to a 10-month low against the greenback (US$1.6103) with markets getting increasingly concerned that the gap between the Yes and No sides had narrowed considerably in advance of the Sept. 18 referendum.

“The abruptness of the shift in one survey should be viewed with caution, but nonetheless reinforces our long-held view that Scotland’s independence referendum is a serious event risk,” said a commentary from Barclays Research.

A Yes vote in the referendum would end Scotland’s 307-year-old union with England and plunge Britain into uncharted constitutional and economic waters.

The loonie also lost ground amid a much better than expected report on building permits. Statistics Canada said municipalities issued building permits worth $9.2 billion in July, up 11.8 per cent from June and the fourth consecutive monthly advance. The increase in July was mainly attributable to higher construction intentions for multi-family dwellings in Ontario and British Columbia as well as institutional buildings in Manitoba. Economists had expected a drop of around 10 per cent.

Meanwhile, commodities were mixed amid weak Chinese trade data.

There were concerns about domestic demand in the wake of the latest trade data from the world’s second-biggest economy. Chinese exports rose 9.4 per cent in August from a year earlier, but imports dropped 2.4 per cent.

Some economists say additional stimulus is needed to prevent China’s growth rate from waning after mini-stimulus measures helped it tick up to 7.5 per cent in the second quarter.

The soft Chinese data and a stronger American currency pushed October crude on the New York Mercantile Exchange down 63 cents to US$92.66 a barrel.

December bullion moved $13 lower to US$1,254.30 an ounce, while December copper was unchanged at US$3.20 a pound.

It is a relatively light week for economic data.

The major event will be August retail numbers in the U.S. where economists are looking for a gain of 0.5 per cent, or 0.2 per cent ex-autos, when the numbers come out on Friday.

In Canada, markets will look to the latest Canadian housing starts data for August on Tuesday. The consensus is calling for an annualized gain of 195,000 units, down slightly from 198,000 in July.