CANADA FX DEBT-C$ ends flat after rebounding from two-week low

Wed Sep 2, 2009 4:35pm EDT
 
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 * C$ weakens slightly to C$1.1048 per US$
 * Traders await Friday's key jobs data
 * Bond prices end higher across curve
 (Recasts)
 By Frank Pingue
 TORONTO, Sept 2 (Reuters) - Canada's currency rebounded off
a two-week low to finish flat versus the U.S. dollar on
Wednesday with traders reluctant to make big bets ahead of key
domestic jobs data due later this week.
 Part of the Canadian dollar's rise off its session low came
after minutes from the U.S. Federal Reserve indicated the
central bank was growing more confident in its view that the
downturn in the U.S. economy was ending. [ID:nN02549306]
 But the currency's rebound off its session low of C$1.1103
to the U.S. dollar, or 90.07 U.S. cents, was held in check as
concerns about the global economic recovery persist and as
North American equity markets finished flat in the latest
session.
 "Looking at the Canadian dollar it's still vulnerable to
some of those global risk issues that continue to be on the
table," said Jack Spitz, managing director of foreign exchange
at National Bank Financial.
 "But really the cue and the directional bias in much of the
currency world is going to be taken through equity valuations
so any material downturn in equities would be ultimately seen
through a bid in dollar/Canada."
 The Canadian dollar closed at C$1.1048 to the U.S. dollar,
or 90.51 U.S. cents, down from C$1.1041 to the U.S. dollar, or
90.57 U.S. cents, at Tuesday's close.
 As it has in recent days, the currency is expected to
follow equities until early on Friday, when key data is
forecast to show the domestic economy shed jobs in August for
the ninth time in 10 months, but at a slower pace than in the
previous month. [ID:nN02544477]
 The Canadian numbers will be released just before the U.S.
nonfarm payrolls report, and the data should influence trade in
the early part of the session before many traders leave early
to get a head start on the long weekend.
 Financial markets in Canada and the U.S. will be closed on
Monday for Labor Day, which generally leads to lower liquidity
and exaggerated swings.
 The Canadian currency is expected to stick to a tight range
near current levels in the next year, a monthly Reuters poll
showed on Wednesday. The poll also showed there was little
chance that the Bank of Canada would intervene in the currency
markets to rein in the Canadian dollar's surge off the
four-year low it hit in March. [ID:N02535283]
 BONDS EDGE HIGHER
 Canadian bond prices, with no domestic data to influence a
move, ended slightly higher across the curve as unexpectedly
weak U.S. private-sector jobs data lent a slight bid to more
secure assets like government debt.
 The data showed U.S. private employers cut 298,000 jobs in
August, which was better than the July figure but worse than
the 250,000 that economists expected. [ID:nN02321193]
 Still, the move in bonds was fairly limited in light of
late summer trading conditions and ahead of Friday's key jobs
reports.
 "I wouldn't read too much into this activity," said Sheldon
Dong, fixed income analyst at TD Waterhouse Private Investment.
"You've got the jobs data coming out so realistically no one is
taking any shots at the market at this point."
 The two-year bond CA2YT=RR rose 1 Canadian cent to
C$99.53 to yield 1.239 percent, while the 10-year bond
CA10YT=RR was 28 Canadian cents higher at C$103.58 to yield
3.316 percent.
 The 30-year bond CA30YT=RR rose 30 Canadian cents to
C$119.25 to yield 3.862 percent.
 Canadian bonds underperformed their U.S. counterparts
across much of the curve. The Canadian 30-year bond yield was
about 25.1 basis points below its U.S. counterpart, compared
with 31.8 basis points on Tuesday.
 (Editing by Jeffrey Hodgson)