CANADA FX DEBT-C$ firms on trade deficit data; U.S. jobs in focus
(Adds details, fresh comment, closing figures) * Canadian dollar at C$1.2564 or 79.59 U.S. cents * Bond prices mostly lower across the maturity curve By Solarina Ho TORONTO, April 2 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as data showed Canada posted a smaller-than-expected trade deficit in February and as investors positioned themselves ahead of Friday's U.S. payrolls data and the Easter long weekend. Canada's trade deficit shrank to C$984 million from C$1.48 billion in January, much smaller than the C$2 billion shortfall economists had forecast, as exporters benefited from stabilizing oil prices. January figures were also revised sharply lower, from C$2.45 billion. "That's given a boost in terms of protecting the downside risk and how ugly things could've gotten," said Rahim Madhavji, KnightsbridgeFX.com president, who added that some broad-based U.S. dollar weakness also helped. "With the data that came out, it wasn't pretty, but wasn't terrible. Slightly better than expected and I think for the most part, a little bit of sigh of relief for Canadian dollar bulls." South of the border, weekly U.S. jobless claims fell more than expected, boosting the labor market outlook despite evidence of slowing economic growth, while the trade deficit narrowed 16.9 percent to $35.4 billion in February. The Canadian dollar finished the session at C$1.2564 to the U.S. dollar, or 79.59 U.S. cents, stronger than Wednesday's finish of C$1.2626, or 79.20 U.S. cents. Shaun Osborne, chief currency strategist at TD Securities, said overall disappointing economic data out of the United States recently has put a crimp on U.S.-Canadian dollar spreads. "Narrower spreads is really kryptonite for USD/CAD ... Spreads have narrowed - that's bad for the U.S. dollar, good for the Canadian dollar," he said, pointing to easing pressure on the Bank of Canada to introduce another rate cut following January's surprise 25 basis point cut. The two-year spread was at -4.6, while the 10-year was -59.5. Strategists said traders were also positioning themselves ahead of Friday's U.S. job report for March, which will likely set the market tone next week. Markets in Europe, Canada and most of the United States will be closed for Good Friday, but the U.S. government will remain open. Markets have become increasingly sensitive to U.S. economic data, particularly as June - the earliest time frame for when the U.S. Federal Reserve could hike interest rates - approaches. Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 1 Canadian cent to yield 0.494 percent and the benchmark 10-year off 1 Canadian cent to yield 1.314 percent. (Editing by Nick Zieminski and Dan Grebler)
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