CANADA FX DEBT-C$ cuts gains, bonds down after tepid jobs report

Fri Dec 3, 2010 8:06am EST
 
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 * C$ retreats from near-parity after jobs report
 * Pares gains to 99.81 U.S. cents
 * Next up: U.S. jobs report for November ECONUS
 TORONTO, Dec 3 (Reuters) - The Canadian dollar pared gains
against the U.S. dollar on Friday after data showed the
domestic economy gave a mixed performance in November as fewer
than expected jobs were created but the unemployment rate
fell.
 Canada's economy added 15,200 jobs last month, while the
unemployment rate fell to 7.6 percent from 7.9 percent as more
youth dropped out of the job market, Statistics Canada said.
 Analysts surveyed by Reuters had expected the economy to
add 18,000 jobs in November and the unemployment rate to remain
at 7.9 percent. [ID:nN03271210] ECONCA
 At 7:30 a.m. (1230 GMT), the Canadian dollar CAD=D4 had
softened to C$1.0019 to the U.S. dollar, or 99.81 U.S. cents,
from C$1.0005 to the U.S. dollar, or 99.95 U.S. cents, shortly
before the data was released.
 But it was still higher than Thursday's North American
session close at C$1.0039 to the U.S. dollar, or 99.61 U.S.
cents.
 The jobs report does little to change expectations the Bank
of Canada will hold its benchmark interest rate steady on Dec.
7 at 1 percent.
 But market watchers said the U.S. jobs report may be just
as critical to the Bank of Canada's monetary policy path.
 "Ironically, the more important numbers for the Bank of
Canada are probably coming out of the U.S. rather than Canada
in that the reason the BoC went on to pause was really the soft
spot in the U.S. economy," said Adam Cole, head currency
strategist, at RBC Capital Markets in London.
 "Domestically, Canada itself has argued for the BoC to
continue to hike, I think, so it's the fading of the soft spot
in the U.S. that will really get the Bank of Canada back on
track."
 Meantime, Canadian government bonds held lower across the
curve following the domestic data, and attention turned to
waiting for the U.S. November jobs report due at 8:30 a.m.
 The two-year government of Canada bond CA2YT=RR was off 1
Canadian cent to yield 1.681 percent, while the 10-year bond
CA10YT=RR was down 23 Canadian cents to yield 3.229 percent.
 (Reporting by Ka Yan Ng and John McCrank, Editing by Chizu
Nomiyama)