CANADA FX DEBT-C$ weaker on U.S. jobs, but services data helps

Fri Jun 3, 2011 3:32pm EDT
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 * C$ off lows, rebounds to C$0.9777 vs US$, or $1.0228
 * Earlier touched weakest level vs US$ since March 21
 * Bond prices pare gains after ISM data
 (Updates to afternoon, adds commentary)
 By Claire Sibonney
 TORONTO, June 3 (Reuters) - The Canadian dollar cut most of
its early losses against the U.S. currency on Friday after
investors latched on to a report showing a pickup in U.S.
services sector growth following dismal jobs data.
 Early U.S. jobs data sent the Canadian dollar to C$0.9852,
or $1.0150 -- its weakest level since March 21 -- compared to
C$0.9782 to the U.S. dollar, or $1.0223, immediately before the
 U.S. non-farm payrolls rose far less than expected in May,
the worst reading since September. The jobless rate rose to 9.1
percent as high energy prices and the effects of Japan's
earthquake bogged down the economy. [ID:nOAT004818]
 But the report was partly offset by U.S. services sector
data that grew modestly in May while gauges of new orders and
employment climbed.
 "The trends for the Canadian dollar are a little mixed,"
said Shaun Osborne, chief currency strategist at TD
 "The Canadian dollar tends to underperform on the back of
weaker-than-expected numbers and although the ISM on the margin
was a little better than expected it doesn't really offset the
big miss we had on the payrolls."
 He noted the general run of both U.S. and Canadian economic
data recently has been quite disappointing.
 At 3:14 p.m. (1914 GMT), the currency CAD=D4 was at
C$0.9777, or $1.0228, down from Thursday's North American
session close at C$0.9756 to the U.S. dollar, or $1.0250.
 Osborne said the range of C$0.9765-75 was pivotal as the
Canadian dollar has closed around 10 basis points on either
side of that level since early last week.
 Near term, he sees Canadian dollar support at C$0.9850 and
resistance at C$0.9670.
 He said the near-term trend is likely to be a weaker
Canadian dollar given the difficult seasonal time for stock
markets and risk-related assets and speculation about a
potential third round of quantitative easing by the U.S.
Federal Reserve.
 Canadian bond prices rallied on the soft U.S. jobs figures,
following U.S. Treasuries higher. [US/]
 Even as investors weigh whether this signals a soft patch
or a prolonged slowdown, markets have begun to come around to
the view that government bonds should benefit in the near term
as inflationary expectations will be contained.
 Canada's two-year bond CA2YT=RR was up 8 Canadian cents
to yield 1.437 percent, while the 10-year bond CA10YT=RR
advanced 33 Canadian cents to yield 2.988 percent.
 (Editing by Jeffrey Hodgson)