CANADA FX DEBT-C$ slides to 5-week low on jobs data, Keystone rejection

Fri Nov 6, 2015 4:57pm EST
 
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* Canadian dollar at C$1.3296, or 75.21 U.S. cents
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, Nov 6 (Reuters) - The Canadian dollar hit its
weakest level against the U.S. dollar since Oct. 1 after robust
U.S. jobs data eclipsed an election-enhanced jump in Canadian
jobs, with soft oil prices and the Keystone pipeline rejection
also weighing on the currency. 
    Canada added 44,000 jobs in October, its biggest gain in
five months, while the 271,000 rise in U.S. nonfarm payrolls
raised expectations of a December interest rate hike by the U.S.
Federal Reserve.
    The Canadian data included an increase of 32,000 positions
in the public administration sector, coinciding with temporary
hiring related to the federal election. 
    "I think there will be a correction in November," said David
Watt, chief economist at HSBC.
    The Canadian dollar ended at C$1.3296 to the
greenback, or 75.21 U.S. cents, after having hit a five-week low
at C$1.3318. That was much weaker than Thursday's close of
C$1.3168, or 75.94 U.S. cents and left the currency 1.7% lower
on the week.
    Moreover, the close above the October 28 peak at 1.3281 has
shifted sights to September's 11-year peak at 1.3457.
    "As we approach the December rate decision by the Fed I
think there is quite a strong possibility that we are going to
see more Canadian dollar weakness," said Jennifer Lee, senior
economist at BMO Capital Markets, adding that softer oil prices
will also weigh on the currency.
    She also noted U.S. President Barack Obama's rejection of
the proposed Keystone XL oil pipeline, which could have helped
boost Canadian crude exports and U.S. dollar receipts for
Canadian producers. 
    U.S. crude oil prices settled at $44.29 a barrel,
down 2.01 percent, while Brent crude fell 0.77 percent
to $47.61 a barrel. 
    Nonetheless, the Canadian dollar strengthened against other
G7 currencies, registering a three-month high against the euro
at C$1.4191 before trimming gains.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 9 Canadian
cents to yield 0.676 percent and the benchmark 10-year
 down 65 Canadian cents to yield 1.720 percent.
    The spread between the 2-year yield and the 10-year yield
widened 2.4 basis points to 104.4 basis points, leaving the
curve at its steepest since mid-September. 
    The spread between yields on Canadian and U.S. two-year
bonds was little changed at -21 basis points, while the 10-year
spread widened to -60.9 basis points.

 (Additional reporting by Alastair Sharp; Editing by Andrew Hay)