The Canadian dollar jumped against the greenback on Thursday, reaching a 3-1/2 month high, after a surprisingly powerful March employment report suggested to some that the Bank of Canada will eventually hike interest rates.
The currency closed at C$1.1506 to the U.S. dollar, or 86.91 U.S. cents, up from C$1.1592, or 86.26 U.S. cents, at Wednesday's close.
The Canadian economy added a whopping 54,900 jobs in March, blowing past forecasts for a 15,000-job gain, while the unemployment rate stayed unchanged at a 31-year low of 6.1 percent.
The stronger than expected report was the latest in a string of robust monthly jobs reports, and pushed the currency as high as C$1.1487, or 87.05 U.S. cents, a level it has not touched since late December. The Canadian unit eased slightly in the afternoon, as market participants drifted away for the Friday Easter holiday.
"The employment rate, arguably the best measure of labor-market strength, is at a record high," at 63.5 percent, said Warren Lovely, senior economist with CIBC World Markets in Toronto.
"Tightness in the labor market is going to prevent the Bank of Canada from entertaining easier (monetary) policy and the Canadian dollar is reacting as you might expect, it's getting a bit of a bid," Lovely said.
The Ivey Purchasing Managers Index, also released on Friday, painted an upbeat picture as well. It rose to 67.3 in March, the highest result since last June. An index reading above 50 indicates an increase in purchasing activity.