TORONTO: The Canadian dollar strengthened to an eight-week high against the US dollar on Friday after stronger-than-expected domestic employment data boosted expectations for Canada’s economic outlook and narrowed the yield gap between Canadian and US bonds.

The loonie rose 0.6% to C$1.3935 per US dollar, equivalent to 71.76 US cents, reaching its strongest intraday level since June 11. The currency was on track for a weekly gain of around 0.6%.

Canada added 75,100 jobs in July, far exceeding economists’ expectations for a gain of 16,500. The unemployment rate also declined to 6.4%, its lowest level in two years.

The stronger labour-market figures suggested that economic momentum seen during the second quarter may have continued into the beginning of the third quarter. Preliminary data has indicated that Canada’s economy expanded at an annualised rate of around 3.4% in the second quarter.

The Canadian currency also benefited from weakness in the US dollar following disappointing US employment figures. The US economy unexpectedly lost jobs in July, while payroll figures for the previous two months were revised significantly lower, raising questions over whether the Federal Reserve could adjust its interest-rate policy in the coming months.

Meanwhile, oil prices, another important factor for the Canadian economy because Canada is a major oil exporter, rose 0.5% to $77.64 a barrel as markets monitored developments surrounding the Strait of Hormuz and signals of a possible agreement involving Gulf states and Iran.

Canadian government bond yields moved higher across a flatter yield curve. The two-year Canadian yield increased 2.3 basis points to 2.951%, while the spread between Canadian and equivalent US two-year bonds narrowed by 8.3 basis points to approximately 123 basis points in favour of the US note.

The latest employment figures have strengthened the Canadian dollar while providing fresh evidence that the country’s economy may be maintaining stronger momentum than previously expected.