February 10, 2017 / 10:19 PM / 6 months ago

CANADA FX DEBT-C$ strengthens on jobs surge, higher oil prices

    * Canadian dollar ends at C$1.3085, or 76.42 U.S. cents
    * Loonie touches its strongest since Monday at C$1.3063
    * For the week, the loonie weakens 0.4 percent
    * Bond prices end lower across the yield curve

    By Fergal Smith
    TORONTO, Feb 10 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday as oil prices rose and
domestic jobs surged but still ended the week lower.
    Canada added 48,300 jobs in January, Statistics Canada said,
as hiring in the service sector helped the labor market build on
its momentum from the latter part of 2016.                  
    "It's another impressive read," said Desjardins Senior
Economist Jimmy Jean.
    He said the Bank of Canada would remain concerned about the
quality of job creation and the number of hours worked but would
be happy with the employment market's expansion.
    The implied probability of a Bank of Canada interest rate
hike by the end of the year rose to more than 40 percent. It was
just 22 percent on Thursday morning before U.S. President Donald
Trump's promise of a "phenomenal" tax plan in the next few
weeks, which lifted bond yields.           
    "The market is mispricing the risks around the Bank of
Canada," said Ian Gordon, FX strategist at Bank of America
Merrill Lynch.
    "Their main concern is whether you continue to see a
tightening in financial conditions driven by what's happening in
the U.S."
    U.S. crude        prices settled 86 cents higher at $53.86 a
barrel after reports that Organization of the Petroleum
Exporting Countries members delivered more than 90 percent of
the output cuts they pledged in a landmark deal that took effect
in January.      
    Oil is one of Canada's major exports. 
    The Canadian dollar          ended at C$1.3085 to the
greenback, or 76.42 U.S. cents, stronger than Thursday's close
of C$1.3141, or 76.10 U.S. cents.
    The currency's weakest level of the session was C$1.3158,
while it touched its strongest since Monday at C$1.3063.
    Gains for the Canadian dollar came even as the greenback
       strengthened against a basket of major currencies.
            
    Speculators increased bullish bets on the Canadian dollar,
data from the Commodity Futures Trading Commission and Reuters
calculations showed. Canadian dollar net long positions rose to
8,550 contracts as of Feb. 7 from 3,472 a week earlier.
    Still, the loonie weakened 0.4 percent for the week after
having posted a recent four-month high of C$1.2969. 
    Canadian government bond prices were lower across the yield
curve, with the two-year            dipping 3.5 Canadian cents
to yield 0.77 percent and the 10-year             falling 11
Canadian cents to yield 1.693 percent.    
    The spread between Canada's two-year yield and its U.S.
equivalent narrowed by 1 basis points to -42.4 basis points.

 (Reporting by Fergal Smith; Editing by Tom Brown)
  
 

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