CANADA FX DEBT-C$ edges higher, bonds up on weak U.S. jobs
* C$ closes at 86.04 US cents after hitting 1-week high
* Bond prices rise on weak U.S. jobs numbers, stocks
* U.S. jobs data shakes confidence in economic recovery (Adds details)
By Ka Yan Ng
TORONTO, July 2 (Reuters) - The Canadian dollar finished slightly higher against the greenback on Thursday, but well off its session peaks, as a gloomy U.S. jobs report cast doubt about the speed of economic recovery and dulled risk appetite.
U.S. employers cut 467,000 jobs in June, far more than expected, while the unemployment rate rose to 9.5 percent as the labor market continued to struggle in the recession. The data broke a four-month trend of moderation in U.S. job losses, and the May figure was revised downwards. [ID:nN01210643]
The Canadian dollar hit a one-week high of C$1.1438 to the U.S. dollar on Wednesday when Canadian markets were closed for Canada Day, ahead of Thursday's U.S. jobs data.
But the currency pared those gains throughout the Thursday session as the bleak U.S. jobs report enhanced the greenback's safe-haven appeal. [ID:nN0284433]
"It's retaining a fairly soft bias against the U.S. dollar," said Shaun Osborne, chief currency strategist at TD Securities.
"It's pretty disconcerting to see dollar/Canada come back so well bid today but perhaps this is just a reflection of pre-weekend positioning and (U.S.) dollar buying after the disappointing payroll numbers this morning."
Contributing to the Canadian currency's soft tone was a drop in oil prices and equity markets, both a gauge of investor risk appetite. Oil, a key Canadian export, fell 4 percent on Thursday, while equity markets were also lower.
The Canadian dollar finished at C$1.1623 to the U.S. dollar, or 86.04 U.S. cents, up slightly from C$1.1630 to the U.S. dollar, or 85.98 U.S. cents, at Tuesday's close. Canadian markets were closed on Wednesday for Canada Day.
Still Osborne said TD Securities remained "generally constructive" on the Canadian dollar and expected it to edge higher after June's performance, when it underperformed major currencies.
Commodity prices are expected to play a key role in gradually pushing the Canadian dollar back towards 90 U.S. cents in a year's time, but the currency will remain flat for the current quarter, a monthly Reuters poll showed. [ID:nN0265716]
Having just wrapped up one of its best quarterly performances against the greenback, rising 8.4 percent in the second quarter despite a 6 percent slide in June, the Canadian dollar appears poised to have a relatively flat showing for the next three months around C$1.15 to the U.S. dollar.
Canadian bond prices moved higher in concert with their U.S. counterparts, which caught a safe-haven bid in the wake of the U.S. jobs numbers and a slump in equity markets.
The benchmark two-year government bond rose 7 Canadian cents to C$100.15 to yield 1.170 percent, while the 10-year bond was up 14 Canadian cents at C$103.34 to yield 3.35 percent.
The 30-year bond gained 25 Canadian cents to C$119.60 to yield 3.848 percent. The comparable U.S. issue yielded 4.325 percent.
Canadian bonds underperformed U.S. issues across the curve. The Canadian 30-year bond was 47.7 basis points below the U.S. 30-year yield, little changed from Tuesday. (Editing by Rob Wilson)
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