CANADA FX DEBT-C$ weakens as U.S. data eclipses domestic jobs strength

Fri Dec 6, 2013 4:37pm EST
 
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* Canadian dollar at C$1.0656 or 93.84 U.S. cents
    * Fed taper concerns overcome strong Canadian jobs numbers
    * Bond prices mostly lower across maturity curve


    By Leah Schnurr
    TORONTO, Dec 6 (Reuters) - The Canadian dollar weakened
against the greenback on Friday as a strong domestic employment
report was offset by better-than-expected jobs figures in the
United States, which bolstered expectations the Federal Reserve
could reduce its stimulus sooner rather than later.
    The currency has been hammered in recent weeks by a host of
factors, including a more dovish Bank of Canada, weak oil prices
and uncertainty about the path of monetary stimulus south of the
border.
    Trading was choppy early in the session on Friday with the
loonie retreating to its 3-1/2-year low shortly after the jobs
reports were released, matching a trough hit on Wednesday. 
    Data showed Canada added 21,600 jobs last month, far greater
than the 12,000 that economists had expected, while the
unemployment rate held at 6.9 percent. 
    The Canadian dollar firmed to a session high after the
report, but quickly whipsawed lower after a separate report
showed the U.S. economy created 203,000 jobs in November, also
better than forecast. 
    The strength of the jobs market is seen as key to
determining when the Fed will start to withdraw. U.S.
policymakers next meet on Dec. 17-18.
    "The Canadian data is certainly proving itself to be
reasonably robust, it's more just that the central banks are the
missing piece to further Canada's strength," said Don Mikolich,
executive director of foreign exchange sales at CIBC World
Markets in Toronto.
    The Canadian dollar ended the North American
session at C$1.0656 to the greenback, or 93.84 U.S. cents,
weaker than Thursday's close of C$1.0641, or 93.98 U.S. cents.
The loonie traded as low as C$1.0708.
    The Canadian dollar lost 0.4 percent on the week, its third
negative week in a row.
    A faster timeline for the Fed reducing its $85 billion a
month in bond purchases is seen as bearish for the Canadian
dollar as the move is expected to reduce risk appetite and
benefit the U.S. currency.
    The Canadian dollar has been down in five out of the last
six sessions as the currency has fallen through key technical
levels. A statement from the Bank of Canada earlier in the week
showed the central bank is increasingly concerned about possible
disinflation, reinforcing that market's view interest rates will
stay low for some time. 
    "When you've got a central bank talking down its growth and
rate story, then it's going to be effective at weakening the
currency," said Mikolich.
    Government bond prices were mostly lower across the maturity
curve. The two-year bond was off 1-1/2 Canadian cents
to yield 1.094 percent, while the benchmark 10-year bond
 fell 9 Canadian cents to yield 2.688 percent.