CANADA FX DEBT-C$ weakens to 1-week low; Fed rate bets offset firm jobs data
* Canadian dollar at C$1.3006, or 76.89 U.S. cents * Loonie touches its weakest since Sept. 2 at C$1.3016 * Canadian bond prices lower across steeper maturity curve * 10-year yield reaches its highest in five weeks at 1.142 percent By Fergal Smith TORONTO, Sept 9 (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Friday as a drop in oil prices and increased bets on an impending interest-rate increase by the Federal Reserve offset stronger-than-expected domestic jobs data. Canada's economy added 26,200 jobs in August, recovering some of the positions lost in recent months on increased hiring in the construction and service sectors, data from Statistics Canada showed. Economists had forecast a gain of 15,000 jobs. "I don't know that it should change anyone's broader opinion on the Canadian economy, but it's still encouraging," said Andrew Kelvin, senior rates strategist at TD Securities. The implied probability of a Bank of Canada interest rate cut this year was little changed after the data at around 10 percent, overnight index swaps data showed. U.S. crude was down 1.83 percent at $46.75 a barrel. It was still set for its first weekly gain in three weeks, though, after Russia and Saudi Arabia agreed to work together to help rebalance the markets and after a surprisingly large drawdown in U.S. crude stocks. The U.S. dollar rose against a basket of major currencies as the probability of a Fed rate hike in September climbed to 33 percent from 18 percent on Thursday, according to CME Group's FedWatch tool. The increased probability of a U.S. rate hike came after the European Central Bank on Thursday kept its already loose policy stance unchanged and the Chicago Council on Global Affairs indicated Fed board member Lael Brainard would speak on Monday. At 9:21 a.m. EDT (1321 GMT), the Canadian dollar was trading at C$1.3006 to the greenback, or 76.89 U.S. cents, weaker than Thursday's close of C$1.2928, or 77.35 U.S. The currency's strongest level of the session was C$1.2912, while it touched its weakest since Sept. 2 at C$1.3016. Losses for the loonie came after a more dovish-than-expected statement from the Bank of Canada on Wednesday. The central bank warned that the economy could be weaker than it anticipated just two months ago as exports disappointed. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 1.5 Canadian cents to yield 0.577 percent, and the benchmark 10-year declined 42 Canadian cents to yield 1.129 percent. Earlier on Friday, the 10-year yield touched its highest since Aug. 4 at 1.142 percent. (Reporting by Fergal Smith; Editing by Lisa Von Ahn)
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