Canada dollar sags on U.S. jobs report, bonds fall

Fri May 2, 2008 9:53am EDT
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By John McCrank

TORONTO May 2 (Reuters) - The Canadian dollar fell against its U.S. counterpart on Friday after a U.S. employment report topped market expectations, entrenching the idea that the U.S. Federal Reserve may be nearing the end of its rate cutting cycle.

Canadian bond prices, with a lack of domestic data to influence direction, fell along with the larger U.S. market.

At 9:36 a.m. (1336 GMT), the Canadian dollar was at C$1.0202 to the U.S. dollar, or 98.02 U.S. cents, down from C$1.0193 to the U.S. dollar, or 98.11 U.S. cents, at Thursday's close.

The currency had trundled higher in the overnight session, hitting C$1.0145 against the greenback, or 98.57 U.S. cents, reversing some of Thursday's 1.2 percent decline.

It then gave back all of its gains after the U.S. jobs report showed that the U.S. economy shed 20,000 jobs in April.

Analysts had expected a loss of 80,000 U.S. jobs, according to Reuters Estimates.

The strong reading helped ramp up expectations the Fed may be coming to an end in its interest rate cutting cycle, making the greenback more attractive to investors.

The Fed cut its key lending rate by 25 basis points, to 2 percent on Wednesday and signaled a pause in its easing cycle that has seen it lop 325 basis points off the Fed funds rate since September.   Continued...