Investing.com - The U.S. dollar dropped against its Canadian counterpart on Monday, pulling away from a fresh 12-1/2 year peak hit overnight as investors locked in gains from the greenback’s rally.
USD/CAD hit 1.4077 during early U.S. trade, the session low; the pair subsequently consolidated at 1.4094, declining 0.55%.
The pair was likely to find support at 1.3969, the low of January 6 and resistance at 1.4188, the session high and a 12-1/2 year peak.
The greenback found support after the Labor Department reported on Friday that the U.S. economy added 292,000 jobs last month, after increasing an upwardly revised 252,000 in November. Economists had forecast payrolls to rise by 200,000.
The unemployment rate held steady at a seven-and-a-half year low of 5% in December.
The report bolstered expectations that the Federal Reserve could raise interest rates at a faster pace this year. Higher U.S. interest rates would make the dollar more attractive to yield-seeking investors.
Meanwhile, the commodity-related Canadian dollar continued to follow oil prices lower, which continued to hover near 12-year lows.
Separately, another steep drop in Chinese shares overnight added to fears over the outlook for the world’s second largest economy.
Earlier Monday, the People’s Bank of China set the daily midpoint rate for the yuan higher against the dollar. It was the second day the bank guided the yuan stronger, following eight days of weaker guidance.
The move alleviated concerns over weakness in China’s currency, but shares in China tumbled 5% overnight after the latest inflation figures added to concerns over its economy.
The loonie was sharply higher against the euro, with EUR/CAD tumbling 1.02% to 1.5330.