CANADA FX DEBT-C$ follows greenback lower after soft US job data

Fri Aug 2, 2013 4:18pm EDT
 
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* C$ at C$1.0390 vs US$, or 96.25 U.S. cents
    * U.S. economic weakness weighs on Canada
    * Canadian debt prices higher


    By Andrea Hopkins
    TORONTO, Aug 2 (Reuters) - The Canadian dollar weakened to a
two-week low against the U.S. dollar on Friday after U.S. data
showed employers added fewer jobs than expected in July,
lessening expectations the U.S. Federal Reserve is about to
scale back stimulus measures.
    The slower-than-expected U.S. jobs growth pushed Treasury
yields and the dollar lower while capping stock indexes as
investors grew cautious on the outlook for U.S. economic growth
and Fed plans to wind down easy monetary conditions. 
    U.S. payrolls rose by 162,000 in July, the Labor Department
said on Friday, below the median forecast of 184,000 in a
Reuters poll. The jobless rate fell to 7.4 percent.
 
    The figures sideswiped the greenback, which weakened against
most currencies. But the Canadian dollar felt no benefit, as
weakness in Canada's top trading partner suggested Canada's
central bank will be less likely to raise rates in 2014 if the
Fed is unable to start winding down its stimulus program.
    "Bank of Canada Governor Stephen Poloz is optimistic about
the U.S. recovery but with the jobs numbers today, that optimism
may be slightly misplaced, and that's weighing on the Canadian
dollar," said Adam Button, currency analyst at ForexLive in
Montreal.
    "Monetary policy in Canada and the United States is very
much tied together. The Bank of Canada governor is talking about
rate hikes next year, but unless the Fed starts to taper, that
is unrealistic," he added.
     The Canadian dollar ended the North American
session at C$1.0390 versus the U.S. dollar, or 96.25 U.S. cents,
down from Thursday's North American session close of C$1.0348
versus the U.S. dollar, or 96.64 U.S. cents. That was the
weakest level for the Canadian currency since July 18.
    It had strengthened to a session high of C$1.0339 after the
U.S. data sent the greenback reeling, but then settled weaker as
investors digested the jobs report.
    Button said the employment report, together with moves this
week by the Fed, European Central Bank and Bank of England to
reaffirm easy monetary policy did not give dollar bulls the
signs they were hoping for. Canada's currency, so tied to
strength in its U.S. trading partner and to emerging market
demand for commodies, could have a sluggish end to the summer as
well.
    "Headline risks all point towards higher dollar-CAD, and
will probably push it back up to the top of recent range towards
C$1.06," Button said.
    Government bond prices were stronger across the maturity
curve. The two-year bond was up 6.5 Canadian cents to
yield 1.157 percent, while the benchmark 10-year bond
 rose 52 Canadian cents to yield 2.487 percent.