CANADA FX DEBT-C$ rallies through US$ parity on jobs data

Fri Aug 3, 2012 4:50pm EDT
 
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* C$ climbs as high as $1.0020, strongest since May
    * US payrolls data tops expectations; jobless rate ticks up
    * Currency trades near recent record high against euro
    * Bond prices lower

    By Jennifer Kwan
    TORONTO, Aug 3 (Reuters) - Canada's dollar traded above par
with the U.S. currency on Friday for the first time in more than
two months as markets welcomed a U.S. jobs report that showed
signs of a stronger economy.
    The currency climbed as high as C$0.9980 to the
greenback, or $1.0020, its strongest level since May 11, after
the U.S. data was released.
    U.S. nonfarm payrolls rose 163,000 last month, beating
economists' expectations for a 100,000 gain. The report was
dimmed somewhat, however, by an increase in the jobless rate to
8.3 percent from June's 8.2 percent, even as more people gave up
the search for work. 
    Still, the stronger-than-expected jobs growth suggested the
economy of Canada's largest trading partner continues to expand.
    "The argument behind the move today is much more fundamental
in that if the U.S. economy is picking up jobs at a decent pace
then ultimately it's going to reflect itself in a stronger
economy, which is being priced into equity valuations," said    
Jack Spitz, managing director of foreign exchange at National
Financial Bank, noting Friday's rally on global stock markets.
    At the same time, some think the higher jobless rate could
pressure the U.S. Federal Reserve to try to boost the economy
with a third round of bond purchases.
    "That's got investors thinking we'll see the Fed stepping in
later in the year to provide stimulus, so that's increasing risk
appetite and weakening the U.S. dollar across the board," said
Darren Richardson, a senior corporate dealer at CanadianForex.
    The Fed this week stopped short of offering new monetary
stimulus even as it signaled further bond buys could be in
store.
    The Canadian dollar ended the day off its high at C$1.0019
against the greenback, or 99.81 U.S. cents, up from Thursday's
North American finish of C$1.0072, or 99.29 U.S. cents.
        
    NEAR RECORD HIGH AGAINST EURO
    Against the euro, the Canadian dollar traded at C$1.2390,
pulling back from the record high of C$1.2189, or
82.04 euro cents, which it hit on Thursday after the European
Central Bank (ECB) failed to offer new stimulus measures.
    "Even though the ECB didn't really change their stance
yesterday, the market is still clinging to the hope of the ECB
taking action, combined with the Fed later in the year,"
Richardson said.
    The jump in appetite for riskier assets on Friday hurt
Canadian government bond prices. Canada's two-year bond
 retreated 12 Canadian cents to yield 1.12 percent,
and the benchmark 10-year bond dropped 92 Canadian
cents to yield 1.77 percent.