CANADA FX DEBT-C$ slips with global jitters, cancelling jobs data boost

Fri Jun 10, 2016 4:35pm EDT
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* Canadian dollar settles at C$1.2757, or 78.39 U.S. cents
    * Bond prices higher across a flatter maturity curve
    * 10-year yield hit its lowest since Feb. 25 at 1.117 pct

    By Alastair Sharp
    TORONTO, June 10 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as a fall in oil prices
and a global shift towards less risky assets hurt the currency,
cancelling out earlier gains from a robust domestic jobs report.
    Crude prices settled down 3 percent, while safe-haven assets
such as sovereign debt advanced, with investors staying cautious
due to uncertainty over U.S. interest rate hikes and the
impending vote on Britain's membership in the European Union.
    "It was a big payroll number, much better than expected from
a number of different perspectives," said Jack Spitz, managing
director of foreign exchange at National Bank Financial. 
    "But it came amidst an erosion in investor confidence led by
a drop in equity and commodity all in all the global
drivers that are based on risk are having as much influence, if
not more so, on the value of the Canadian dollar," he said.
    Canada added far more jobs than expected in May as hiring
picked up in construction and manufacturing, although a drop in
the unemployment rate to a 10-month low stemmed from fewer
people looking for work. 
    The Canadian dollar settled at C$1.2757 to the
greenback, or 78.39 U.S. cents, weaker than Thursday's close of
C$1.2713, or 78.66 U.S. cents. It gained 1.4 percent for the
    The currency's strongest level of the session was C$1.2660,
touched soon after the jobs data, while its weakest was
C$1.2780. On Wednesday, the loonie touched a five-week high at
    Speculators cut bullish bets on the loonie, Commodity
Futures Trading Commission data showed on Friday. Net long
Canadian dollar positions fell to 21,537 contracts in the week
ended June 7 from 26,259 contracts in the prior week, which was
the largest net long position since February 2013.
    National's Spitz said more long Canadian dollar positions
will likely be pared ahead of the Brexit vote due on June 23.
    "Heightened volatility is not an environment that typically
equates to strength in the Canadian dollar," he said. "We see
Canada in many respects as a barometer for global risk."
    Canadian government bond prices rose across the maturity
curve. The two-year price rose 4.5 Canadian cents to
yield 0.493 percent and the benchmark 10-year 
climbed 62 Canadian cents to yield 1.119 percent, touching its
lowest since Feb. 25.
    The curve flattened, as the spread between 2-year and
10-year yields narrowed to 62.3 basis points, indicating
outperformance for longer-dated maturities. 

 (Additional reporting by Fergal Smith; Editing by Nick
Zieminski and Chizu Nomiyama)