CANADA FX DEBT-C$ strengthens ahead of jobs data

Thu Aug 6, 2015 4:30pm EDT
 
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(Adds strategist comment, updates prices)
    * Canadian dollar at C$1.3108, or 76.29 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Alastair Sharp
    TORONTO, Aug 6 (Reuters) - The Canadian dollar strengthened
versus its U.S. counterpart on Thursday, with trading muted
ahead of both Canadian and U.S. employment reports due on
Friday.
    The move came despite a fall in the price of oil 
, a major Canadian export, as the greenback pulled back
against most major currencies.  
    "It's a bit of consolidation heading into tomorrow's 
employment report," said Greg Moore, senior currency strategist
at Royal Bank of Canada. "We're essentially in the range of the
moves this week."
    The loonie, as Canada's currency is colloquially known, has
weakened steadily since mid-June and has mostly traded between
C$1.31 and C$1.32 so far this week, near 11-year lows.
    It ended the North American session trading at
C$1.3108 to the greenback, or 76.29 U.S. cents, compared to
Wednesday's close of C$1.3188, or 75.83 U.S. cents.
    Moore said the loonie would likely weaken by a couple of
cents through the remainder of 2015 before improving next year
as oil picks up and Canada's economy recovers, giving the Bank
of Canada scope to raise borrowing costs after two 2015 cuts. 
    A strong print on the U.S. jobs data would bolster the
assumption the Federal Reserve will hike U.S. rates starting in
September, which would make the Canadian dollar less attractive.
    "For me, the risk is that we get a more positive U.S.
employment report, on the basis of the early indications we've
had in the last few days," said Adam Cole, global head of FX
strategy at Royal Bank of Canada.
    The number of Americans filing new applications for
unemployment benefits rose less than expected last week. 
 
    Cole said a strong U.S. nonfarm payrolls figure on Friday
would eclipse the Canadian data and could push the currency pair
through C$1.33. 
    Economists expect the U.S. economy to have added 223,000
jobs in July and for Canada to have added 5,000.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up half a
Canadian cent to yield 0.436 percent and the benchmark 10-year
 adding 24 Canadian cents to yield 1.449 percent. The
three-year issue bucked the trend, and currently yields less
than the two-year.
    The Canada-U.S. two-year bond spread was -26.9 basis points,
while the 10-year spread was -77.2 basis points.

 (Editing by Meredith Mazzilli and James Dalgleish)