The Canadian dollar bounced back from overnight weakness Friday to end virtually flat against the U.S. dollar in nervous trading, with investors staying focused on the sovereign debt crisis in Europe.
Slightly stronger-than-expected domestic employment data for May helped bolster the currency somewhat in volatile environment.
The U.S. dollar is trading at C$1.0283 from C$1.0278 late Thursday.
It had declined in earlier trading, with the U.S. dollar reaching a session high at C$1.0356 as investors shied away from risk-sensitive assets.
Jobs data in Canada came in slightly better than expected, with a gain of 7,700 net jobs in May against a consensus forecast of 5,000 and a gain of 58,200 in April. The unemployment rate remained steady at 7.3%.
"The market itself was probably prepared for a slightly worse number," said Shaun Osborne, chief currency strategist at TD Securities.
The modest strength in Canada's labor market in June was not seen as sufficient to influence expectations that the Bank of Canada is likely to remain sidelined for the rest of the year, if not longer. But it was enough to underpin a firming the loonie, which has been buffeted by strong head winds in earlier sessions as investors shied away from assets considered risk sensitive.
The market's attention honed in on the crisis in Europe, however, relegating domestic data to a secondary role.
"The focus is on [Spain] and the potential for some progress there, maybe a bank bailout of some sort over the weekend," said TD's Osborne. "At the moment, at least, that's helping us out."
But global markets have been fickle in their attitude to risk-sensitive assets, embracing them when the news flow is more positive and spurning them when it isn't.
"Everybody's forgetting that just 24 hours or so ago they were all gloom and doom because [Fed Chairman Ben Bernanke] wasn't strapping himself into the helicopter," Osborne said, referring to the top U.S. central banker's moniker "Helicopter Ben" based on a reference Bernanke himself made to a statement by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.
"It's all bipolar...very short-term, headline-driven trading at the moment," Osborne said.
The U.S. dollar's strong rebound against its Canadian counterpart on Thursday suggests any weakness will likely be short lived, he said.
"We did have quite a decent rally yesterday, so I'd be surprised if we got back even close to C$1.0200," Osborne said.
These are the exchange rates at 3:25 p.m. EDT (1925 GMT) and 8:00 a.m. EDT (1200 GMT) Friday, and late Thursday.