C$ posts weekly gain, jobs beat flashes 'amber light' on rate cuts

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday but held on to much of this week's gains as a bigger-than-expected domestic jobs increase supported the view that the Bank of Canada is not in a rush to cut interest rates.

The loonie was trading 0.2% lower at 1.3480 per U.S. dollar, or 74.18 U.S. cents, after earlier touching its strongest level since Feb. 9 at 1.3421. For the week, it was up 0.6%.

Gains this week came as the U.S. dollar lost ground against a basket of major currencies.

"The market is latching back in again on (Federal Reserve) rate-cut signals," said Amo Sahota, director at Klarity FX in San Francisco. "Generally, the market feels you can put money back into risk assets."

On Thursday, Fed Chair Jerome Powell said the U.S. central bank was "not far" from gaining the confidence it needs in falling inflation to begin cutting interest rates.

That was a "green light" on rate cuts, as compared to an "amber light" from the Bank of Canada, Sahota said.

The Canadian central bank on Wednesday said it was too early to consider easing rates as it kept its benchmark rate on hold at a 22-year high of 5%. Money markets see a roughly 85% chance the BoC waits until June to ease, little changed from before the jobs report.

Canada's economy added 40,700 jobs in February, double the expected increase, but wage growth slowed for a second consecutive month and the unemployment rate ticked up to 5.8%.

The price of oil, one of Canada's major exports, fell 1.2% to $77.96 a barrel, while Canadian bond yields eased across the curve. The 10-year was down nearly 4 basis points at 3.334%.

(Reporting by Fergal Smith; Editing by Leslie Adler)