01/06/2012 09:04 EST | Updated 03/07/2012 05:12 EST

Canadian dollar lower amid weak employment data, eurozone nervousness

TORONTO - The loonie fell almost half a U.S. cent on Friday amid a weak Canadian employment report for December and a greenback that took off over stronger U.S. job creation and renewed nervousness about the European debt crisis.

The Canadian dollar fell 0.76 cents US to 97.37 cents US as Statistics Canada reported that Canada’s jobless rate edged up 0.1 of a percentage point to 7.5 per cent last month as the economy racked up modest job gains.

The agency reported that the Canadian economy created 17,500 jobs during December. The gain followed losses totalling 73,000 during the previous two months.

However, all the job gains in December were in the weaker categories of part-time and self-employment, while full-time work fell by 25,500 jobs.

The news was much better from Canada's biggest trading partner.

The U.S. Labour Department reported that the economy created 200,000 jobs during December, much better than the 155,000 that economists expected.

Also, the jobless rate moved down 0.2 of a percentage point to 8.5 per cent.

Worries about the eurozone government debt crisis are never far away and Italy caught traders’ attention Friday.

Traders also bought the U.S. currency as borrowing rates in Italy spiked Friday with the country's benchmark 10-year bond yield edging further above seven per cent, a borrowing rate that is considered unsustainable.

Traders also worried about the health of European banks, which are hurting due to fears that they will take big losses on their holdings of government debt and will struggle to raise new cash to plug those holes.

Trading in UniCredit, Italy’s largest bank, was halted on Thursday after the stock lost a quarter of its value in two days. The bank said Wednesday it would need to offer huge discounts to investors to raise money in a new share sale. The stock was down another 11 per cent on Friday.

Longer-term concerns about the euro and the region’s financial system pushed the common currency to 15-month lows of US$1.2775 on Thursday. It worsened Friday, moving down to $1.2723.

Outside the eurozone, Hungary was sliding deeper into its own financial crisis. It had to pay a staggeringly high interest rate of 10 per cent on its 12-month debt. That is far above the seven per cent level that forced Greece and Portugal to seek emergency bailouts to prevent them from defaulting on their debts.

Oil prices dropped as traders focused on European economic reports that showed weaker factory orders in Germany and soft retail sales elsewhere in November. The eurozone has struggled to overcome massive government debts, and many economists expect it will fall back into recession sometime this year.

February crude on the New York Mercantile Exchange dropped 25 cents to US$101.56 a barrel.

The February bullion contract lost $1.30 to US$1,616.80 an ounce while March copper gained a cent to US$3.43 a pound.