CANADA FX DEBT-C$ strengthens as exports jump, oil rallies
* Canadian dollar at C$1.3012, or 76.85 U.S. cents * Bond prices lower across the maturity curve * Loonie touches its strongest since Tuesday at C$1.3012 By Fergal Smith TORONTO, Sept 2 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as domestic data showed a jump in exports and oil rose, while a slowdown in U.S. employment growth weighed on the greenback. Canada's trade deficit in July unexpectedly shrank to C$2.49 billion from a record C$3.97 billion in June as exports jumped by 3.4 percent and imports stagnated, Statistics Canada data indicated. "This is definitely a breath of fresh air for Canadian trade," said Doug Porter, chief economist at BMO Capital Markets, who noted strength in export volumes and in non-energy exports. The Bank of Canada has been counting on an uptick in non-energy exports for the economy to meet its growth projections. However, non-energy exports have been hampered this year by weak U.S. business investment, while a weaker Canadian dollar has not helped exports as much as expected. The central bank will view the data "with great relief," Porter said. Still, he does not expect "big changes" at next week's Bank of Canada interest rate decision. The Bank of Canada will likely keep interest rates unchanged for even longer than had been anticipated as a lack of momentum in the economy has prompted analysts to push their expectations for a hike further back to 2018, a Reuters poll found. At 9:25 a.m. EDT (1325 GMT), the Canadian dollar was trading at C$1.3012 to the greenback, or 76.85 U.S. cents, stronger than Thursday's close of C$1.3086, or 76.42 U.S. cents. The currency's weakest level of the session was C$1.3114, while it touched its strongest since Tuesday at C$1.3012. U.S. crude prices were up 1.78 percent to $43.93 a barrel as a report showing weaker U.S. jobs growth in August suppressed the dollar, pushing up commodities. The U.S. dollar dipped against a basket of major currencies as U.S. employment growth slowed more than expected in August after two straight months of robust gains and wage growth moderated. The data could effectively rule out a rate increase from the Federal Reserve this month. Canadian government bond prices were lower across the maturity curve, with the two-year bond down 4 Canadian cents to yield 0.585 percent and the benchmark 10-year falling 36 Canadian cents to yield 1.043 percent. The Canada-U.S. two-year bond spread narrowed 2.7 basis to -20 basis points, while the 10-year spread was 2 basis points narrower at -54.5 basis points as Canadian government bonds underperformed. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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