The U.S. dollar is poised to strengthen versus its Canadian counterpart after a report showed Canada’s labor market is lagging behind that of the U.S., Morgan Stanley said.

The Canadian currency, called the loonie for the image of the aquatic bird on the C$1 coin, dropped versus all of its 31 major peers Friday after the government reported the economy unexpectedly lost jobs in June and the unemployment rate rose. Hedge funds and other large speculators turned bullish on the loonie this month after 70 weeks of betting against it.

“The big picture is that Canada’s year-to-date labor market performance has been dire compared to that in the U.S.,” Evan Brown and Calvin Tse, New York-based currency strategists at the bank, wrote in a client note. The employment report “reinforces our conviction that Canada is not nearly as poised to gain from U.S. growth as it was in the past.”

Morgan Stanley said the greenback may rise to C$1.12, a level last reached on March 25. A bet on it gaining should be scrapped if the U.S. currency drops to C$1.055, the strategists said. They couldn’t be reached for further comment.

The U.S. dollar rose 0.8 percent to C$1.0734 and touched C$1.0737, a two-week high, in Toronto trading. It fell to C$1.0621 on July 3, a six-month low, after data last month showed inflation rising above the Bank of Canada’s 2 percent target in May for the first time since 2012. The greenback reached a 4 1/2 year high of C$1.1279 in March after Bank of Canada Governor Stephen Poloz said he couldn’t rule out an interest-rate cut to spur slowing growth. The BOC’s next policy decision is due July 16.

The U.S. is Canada’s biggest trade partner.

Canadian employers eliminated 9,400 jobs last month, data showed, versus a forecast in a Bloomberg survey for a gain of 20,000. The unemployment rate rose to 7.1 percent, versus a projection it would stay at 7 percent.

U.S. payrolls increased by 288,000 positions in June, and the jobless rate fell to 6.1 percent, data showed on July 3.