CANADA FX DEBT-C$ hits one-year high after jobs data tops views

Fri Sep 7, 2012 10:40am EDT
 
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* C$ touches C$0.9778, or C$1.0227, strongest since Sept
2011
    * Canada adds 34,300 jobs in August, above expectations
    * U.S. adds 96,000 jobs, below expectations
    * Bond yields fall across curve

    By Solarina Ho
    TORONTO, Sept 7 (Reuters) - The Canadian dollar touched its
strongest level in nearly a year on Friday as a "perfect storm"
of risk appetite and stronger-than-expected domestic employment
data pushed the currency through the C$0.98 level.
    The Canadian economy added 34,300 jobs last month, topping
all expectations of analysts surveyed by Reuters. Canada has
recouped all the jobs lost in the recession, and employment
stands 176,600 higher than in August 2011, with most of the
increases in full-time positions.  
    "It's likely to support the already hawkish stance of the
Bank of Canada. We've had a slew of some disappointing domestic
data recently, so this is a positive development for the
Canadian dollar," said Camilla Sutton, chief currency strategist
at Scotiabank.   
    By contrast, in the United States jobs growth slowed sharply
in August, with nonfarm payrolls increasing less than expected.
The weak report strengthens the case for the Federal Reserve to
pump more money into the sputtering economy. 
    Fed Chairman Ben Bernanke has made plain that the central
bank is seriously considering additional monetary policy easing
at its meeting next week to help counter the "grave" stagnation
of the U.S. labor market.
    "The combination of relatively decent domestic data and also
a general improvement in risk appetite, as the market seems to
have fully priced in doing another round of quantitative easing
in next week's (Fed) meeting, which is good for all of the risk
proxies, including Canada," said Adam Cole, global head of FX
strategy at Royal Bank of Canada in London.    
    "It's kind of a perfect storm for Canada of good domestic
news and the right international environment."
    At 10:21 a.m. (1354 GMT), Canada's dollar was trading at
C$0.9783 against the U.S. dollar, or $1.0222, from Wednesday's
North American session close at C$0.9828, or $1.0175. Earlier,
it touched C$0.9778, or C$1.0227, the currency's strongest level
since Sept. 19, 2011.
    The Canadian dollar had already been buoyed by Thursday's
announcement by the European Central Bank that it will launch a
new and potentially unlimited bond-buying program to lower
borrowing costs for struggling euro zone countries.
    Cole said the currency may lose some momentum as it
approaches the C$0.9700 level, adding there's not much support
after that until the currency reaches the mid-C$0.90's level. 
    The currency is unlikely to see parity in the near-term, he
said. "I think you'd have to see a wholesale sell-off in risk to
get that."
    Canadian government bonds were higher across the curve, with
the two-year bond up 2 Canadian cents to yield 1.153
percent and the benchmark 10-year bond climbing 36
Canadian cents, yielding 1.800 percent.