CANADA FX DEBT-C$ weakens as U.S. jobs data eclipses Canada trade figures
* Canadian dollar at C$1.0678 or 93.65 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, July 3 (Reuters) - The Canadian dollar weakened against the greenback on Thursday as data showing the country's trade deficit narrowed more than expected in May was overshadowed by a U.S. report that showed strong jobs growth south of the border in June. The robust employment report showed the U.S. economy added a greater-than-expected 288,000 jobs last month, boosting the U.S. dollar to the detriment of the loonie. The U.S. figures erased early Canadian dollar strength and dimmed the impact of a report that showed a narrowing of Canada's trade gap in May as growth in exports picked up. Still, the weakening of the Canadian dollar was relatively modest and stronger jobs growth in the United States should ultimately benefit Canada, said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto. "Given the magnitude of the positive surprise, I think we've hung in pretty well," Chandler said. The Canadian dollar was at C$1.0678 to the greenback, or 93.65 U.S. cents, weaker than Wednesday's close of C$1.0667, or 93.75 U.S. cents. The pullback came a day after the currency hit a six-month high. The Canadian dollar rallied through much of June, fueled in part by surprisingly strong inflation figures. Investors are now turning their attention to how the Bank of Canada might address those figures in its monetary policy statement in mid-July. "If there's any pending weakness coming in the Canadian dollar, it would be for the Bank of Canada to try to replace their concerns about inflation with something else and see how that sits with the foreign exchange market," Chandler said. Canadian government bond prices were lower across the maturity curve, with the two-year off 3-1/2 Canadian cents to yield 1.152 percent and the benchmark 10-year down 24 Canadian cents to yield 2.349 percent. Moody's Investors Service late on Wednesday assigned a "negative" outlook to Ontario's debt and issuer ratings, revised from "stable", but at the same time affirmed its Aa2 ratings. Moody's said the change in outlook reflects the rating agency's assessment of the risks surrounding the province's ability to meet its medium-term fiscal targets. The yield on 10-year Ontario bonds was up at 3.182 percent. (Editing by Peter Galloway)
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