CANADA FX DEBT-C$ slides to more than 5-year low on jobs data

Fri Dec 5, 2014 4:41pm EST
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(Updates with fresh comment and closing figures)
    * Canadian dollar at C$1.1432 or 87.47 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Dec 5 (Reuters) - The Canadian dollar dropped to
its weakest level against the greenback in more than five years
on Friday after U.S. employment data for November came in
stronger than expected and Canadian job figures were weaker than
    The U.S. figures showed strength in both wage growth and job
creation, offering more signals that the U.S. Federal Reserve
might be getting closer to raising interest rates. In Canada,
however, the jobs data affirmed expectations that the Bank of
Canada will stay on hold on rates until late next year.
   "The Bank of Canada will talk up a storm ... but the bottom
line is we don't anticipate the Bank of Canada to really take
any action until maybe the second half of 2015 at the earliest,"
said Darcy Briggs, a fixed-income portfolio manager at the
Bissett unit of Franklin Templeton Investments, adding that the
bank's next move will likely be a rate hike, not a cut.
    "The reaction you're seeing today is more of a U.S. dollar
story rather than a Canadian dollar story ... The Bank of Canada
would always like to see a weaker currency, but I think it's
close to fair value now."
    The Canadian dollar, which was otherwise
outperforming most of its counterparts, closed at C$1.1432 to
the greenback, or 87.47 U.S. cents, weaker than Thursday's close
of C$1.1375, or 87.91 U.S. cents. 
    It briefly retreated to C$1.1476, or 87.14 U.S. cents, its
weakest level since July 2009.
    Canada lost 10,700 jobs in November after two consecutive
months of big gains. Analysts had expected an increase of 5,000
jobs following the gains in October and September. The
unemployment rate edged up to 6.6 percent from October's 6.5
percent as expected.
    Market focus, however, was on the U.S. data, which showed
that wages increased and that employers added 321,000 new jobs
last month, the largest gain in nearly three years and the 10th
straight month that growth has exceeded 200,000.
    "The two-year yields (in Canada) spiked higher on the U.S.
data, despite the weaker Canadian data," said Derek Holt, vice
president of economics at Scotiabank. "Our years of
outperformance compared to the U.S. are well past us."
    Canadian government bond prices were mixed across the
maturity curve, with short-term T-bills rising and longer-term
maturities falling. The two-year was off 7 Canadian
cents to yield 1.049 percent, and the benchmark 10-year
 lost 43 Canadian cents to yield 1.958 percent.

 (Editing by Peter Galloway)