CANADA FX DEBT-C$ suffers worst weekly drop in 2012

Fri May 4, 2012 4:27pm EDT
 
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* C$ ends at C$0.9950 vs US$, or $1.0045
    * Falls 1.5 percent for the week
    * Bond prices higher across curve

    By Jennifer Kwan	
    TORONTO, May 4 (Reuters) - Canada's dollar sank against its
U.S. counterpart on Friday and clocked its worst weekly
performance so far this year as expectations eased that the Bank
of Canada will hike interest rates and U.S. jobs data raised
concerns about the pace of economic recovery.	
    The currency shed 1.5 percent for the week, the
worst weekly performance since mid-December. After soaring to a
seven-month high in April on more hawkish language from the Bank
of Canada, the Canadian dollar retreated in recent sessions as
data threws into question the pace of recovery, analysts
say. 	
    Friday's U.S. employment report was the latest reading to
fuel worries about a slowing recovery. Employers decreased
hiring for the third straight month, adding 115,000 workers in
April, well below forecasts of 170,000 and even below the
depressed expectations of traders that had fallen during the
week after a series of softer economic data. 	
    The currency finished at C$0.9955 versus the U.S. dollar, or
$1.0045, its third consecutive declines, down from Thursday's
close at C$0.9889 versus the greenback, or $1.0112. 	
    "The Canadian dollar actually appreciated over the past two
weeks since the Bank of Canada announced they were considering
rate hikes. Now it's more of investors are looking at the
incoming data and they're getting a little more concerned," said
Charles St-Arnaud, economist and currency strategist at Nomura
Securities in New York.	
    "Obviously today you had a very weak employment that kind of
signaled the U.S. economy may not be growing as fast as people
were expecting." 	
    The Canadian dollar see-sawed immediately after the jobs
report, which provided mixed messages about the economy's
strength ahead of President Barack Obama's November re-election
bid. The report was not all negative. The government revised
upward earlier estimates for payroll growth in February and
March by a combined 53,000 jobs. [ID:nL1E8G43V1 	
    "I think it's confusing because there's a complication of
how quantitative easing expectations play into it," said Camilla
Sutton, chief currency strategist at Scotiabank.	
    "I would argue a weak employment environment in the U.S.
leaves the door open to further QE and is a weight against the
U.S. dollar," she added.	
    The jobs data helped push U.S. crude oil prices down
by 3 percent below $100 a barrel for the first time since
February. 	
    Investors were also slightly cautious ahead of elections in
France and Greece over the weekend as European policymakers
struggle to bring an end to their ongoing debt crisis and
electorates rebel against pinching austerity measures.
  	
    Voting in France and Greece is likely to provide a litmus
test of popular tolerance for further austerity, a day after the
European Central Bank ended near-term hopes of more policy
easing to boost the ailing economy. 	
    Canadian bond prices mostly outperformed U.S. Treasuries
with the two-year bond up 10 Canadian cents to yield
1.255 percent, while the benchmark 10-year bond 
climbed 68 Canadian cents to yield 2.018 percent.