CANADA FX DEBT-C$ flat as Greece news offsets U.S. data worries
* C$ ends at C$0.9756 to the U.S. dollar, or $1.0250
* Bonds flat to lower, outperform Treasuries (Updates to close, adds details, quotes)
By Claire Sibonney
TORONTO, June 2 (Reuters) - The Canadian dollar finished almost perfectly flat against the U.S. currency on Thursday as news of a fresh bailout for Greece helped offset worries about the economic outlook ahead of a key U.S. jobs report.
Senior euro zone officials have agreed in principle on a new financial aid plan for Greece that will give it more time to try to resolve its debt crisis, a source close to the talks told Reuters. [ID:nLDE7510VR]
Earlier, data showed the number of Americans signing up for jobless benefits fell only slightly last week, doing little to calm growing fears of a pullback in the U.S. economy's recovery. [ID:nN02246578]
"The Canadian dollar was struggling a little early as another set of disappointing U.S. stats came out," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
"But as the day wore on, risk tried to rally a little bit and it was mostly tied to expectation of some sort of agreement coming out of Europe ... that appeared to provide a bit more of a better backdrop for risk and the Canadian dollar."
Data showed U.S. factory orders for April also fell, fitting in with other reports on consumer spending and manufacturing indicating the economy has taken a decisively weak tone as the Federal Reserve prepares to wrap up its $600 billion bond-buying program.
Chandler said he thought some of the downward pressure on the Canadian dollar was tempered because investors were shifting their focus to the more closely watched U.S. nonfarm payrolls data for May. Employers likely added 150,000 jobs, according to a Reuters survey, after increasing payrolls by 244,000 in April. [ID:nN31283560]
News that Moody's Investors Service said there is a small but rising risk of a short-lived default by the United States was largely shrugged off by the Canadian dollar after an initial flurry of action.
The currency CAD=D4 ended the North American session at C$0.9756 to the U.S. dollar, or $1.0250, one tick stronger than Wednesday's close at C$0.9757 to the U.S. dollar, or $1.0249. Earlier, the currency hit a one-week low of C$0.9810, or $1.0194.
Camilla Sutton, chief currency strategist at Scotia Capital, said the potential for a weak U.S. nonfarm payrolls number may be weighing on traders minds.
"Even though the actual consensus is potentially unchanged, the whisper number is a lot lower."
Markets are already prepared for data that will likely show U.S. employment cooled in May, confirming the economy's loss of momentum as it grapples with a raft of headwinds ranging from high energy prices and bad weather to supply chain disruptions from the earthquake in Japan.
A weak figure would add to a recent stretch of soft data that has reinforced concerns about an uneven economic recovery, particularly in the United States, making investors take riskier assets off the table.
Canadian government bond prices were mostly flat to lower, outperforming U.S. Treasuries, which sold off harder after the Moody's warning and positive news about the euro zone. [US/]
Canada's two-year bond CA2YT=RR was up 4 Canadian cents to yield 1.487 percent, while the 10-year bond CA10YT=RR lost 31 Canadian cents to yield 3.027 percent.
The yield the 10-year Canadian bond traded 1.4 basis points below its U.S. counterpart, compared with 4.7 basis points above on Wednesday. (With additional reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)
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