CANADA FX DEBT-C$ edges higher ahead of Friday's key jobs data

Thu Sep 3, 2009 4:34pm EDT
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 * C$ rises slightly to C$1.1033 per US$
 * Traders await Friday's key jobs data
 * Bond prices finish lower across curve
 By Frank Pingue
 TORONTO, Sept 3 (Reuters) - Canada's currency rose slightly
against the greenback on Thursday, boosted by stronger
equities, but investors largely avoided big bets ahead of key
domestic and U.S. jobs data that will give a glimpse into the
health of the two economies.
 If the reports out Friday show more jobs were shed than
expected, traders could unload the Canadian dollar and flock to
the U.S. dollar given its status as a safe haven play. But a
strong reading could boost the Canadian currency.
 "It's just a matter of traders just kind of sitting on
their hands waiting on the numbers for tomorrow," said Brendan
McGrath, senior FX trader at Custom House, a currency services
firm in British Columbia. "But we should see the U.S. dollar
catch a bid tomorrow if the U.S. and Canadian employment data
is worse than expected."
 According to McGrath, negative surprises in the data could
knock the Canadian dollar back down toward the two-week low of
C$1.1103 that it hit Wednesday. And he said a significant break
above C$1.11 would put the next resistance level for the dollar
around C$1.13.
 The Canadian dollar closed at C$1.1033 to the U.S. dollar,
or 90.64 U.S. cents, up from C$1.1048 to the U.S. dollar, or
90.51 U.S. cents, at Wednesday's close.
 The currency received support from equity markets. The
S&P/TSX composite index .GSPTSE ended up 2.06 percent at
10,921.49, while the Dow Jones industrial average .DJI rose
0.69 percent to 9,344.61.
 The Canadian economy is expected to have shed 10,000 jobs
in August, a smaller decline than July, while the unemployment
rate is seen rising. [ID:nN02544477]
 The Canadian numbers will be released just before the U.S.
nonfarm payrolls report, which is expected to show employers in
August likely cut jobs by the least amount in a year, a sign of
healing in the labor market. [ID:nN01485399]
 Activity during the second half of Friday's session could
reach a standstill as many traders may leave early for 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.
 Canadian bond prices ended slightly weaker as hints of
stock market stability lessened the demand for more secure
assets like government debt and ate away at a position of
recent gains.
 The slip in prices mirrored a similar move in the bigger
U.S. Treasury market as data there on the service sector and
weekly jobless claims offered further suggestion that a modest
economic recovery was under way. [ID:nN0391201]
 The two-year bond CA2YT=RR dipped 4 Canadian cents to
C$99.50 to yield 1.259 percent, while the 10-year bond
CA10YT=RR shed 13 Canadian cents to C$103.32 to yield 3.346
 The 30-year bond CA30YT=RR slipped 30 Canadian cents to
C$118.95 to yield 3.878 percent.
 Canadian bonds outperformed their U.S. counterparts across
much of the curve. The Canadian 30-year bond yield was about
28.7 basis points below its U.S. counterpart, compared with
26.1 basis points on Wednesday.
 (Editing by Jeffrey Hodgson)