CANADA FX DEBT-C$ flat as Greece news offsets U.S. data worries

Thu Jun 2, 2011 4:30pm EDT
 
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 * 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)