CANADA FX DEBT-C$ follows euro lower as greenback jumps

Thu Feb 3, 2011 12:26pm EST
 
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 * C$ weaker at $1.0100
 * Euro weakness boosts US$ against range of currencies
 * Positive service sector data supports US$ strength
 * Bond prices fall across curve
 (Updates to midday, adds details, quotes)
 By Claire Sibonney
 TORONTO, Feb 3 (Reuters) - The Canadian dollar softened on
Thursday against its U.S. counterpart, which strengthened as
the euro weakened after European Central Bank President
Jean-Claude Trichet sounded less hawkish than expected during a
news conference.
 The euro fell sharply against the greenback as markets
focused on the ECB's view that inflation is not a danger,
dampening speculation of an ECB interest-rate hike. [FRX/]
 The euro's struggles helped to boost the U.S. dollar's
fortunes against a range of currencies including the Canadian
dollar, said Sacha Tihanyi, currency strategist at Scotia
Capital.
 "For the FX market, it's all about the euro right now," he
said.
 At 11:57 a.m. (1657 GMT), the Canadian currency CAD=D4
was at C$0.9901 to the U.S. dollar, or $1.0100, down from
Wednesday's North American finish of C$0.9882 to the U.S.
dollar, or $1.0119.
 Jack Spitz, director of foreign exchange at National Bank
Financial, noted the euro had been better bid for the last
number of sessions in anticipation of more hawkish ECB stance.
 "Much of the price action in the currency market has been
taken off of the short-covering of U.S. dollars against euro,
before and after Trichet's press conference," he said.
 "So, disappointment in euro rhetoric reflecting itself in a
.. slide in the euro, which combined with a global macro bid to
the U.S. dollar from a risk perspective, has contributed to
bids in dollar/Canada as well," he said.
 Data that showed that growth in the U.S. services sector in
January was the fastest in more than five years was also
U.S.-dollar positive. [ID:nN03256467]
 Market focus, however, was clearly on Canadian and U.S.
employment figures for January, to be released on Friday. In
Canada, employers are seen adding 15,000 jobs, while the
unemployment rate is expected to hold steady at 7.6 percent.
[ID:nN28144465]
 After a drop in U.S. jobless claims figures on Thursday and
positive private-sector employment data on Wednesday, Spitz
said there is anticipation of better numbers south of the
border.
 This contrasts with toned down expectations in Canada after
Finance Minister Jim Flaherty warned earlier this week of "a
challenge" with respect to unemployment numbers.
[ID:nN31215923]
 Spitz said the two reports combined should contribute to
volatile action on Friday morning.
 He noted that the Canadian dollar's year-to-date high of
C$0.9837 versus the U.S. dollar is providing near-term
resistance for Canada's currency. Supporting the Canadian
dollar is a technical trend channel of C$1.0037 that has been
in place since late November.
 Canadian bond prices edged lower, following the path of
U.S. Treasuries, which weakened on worries about inflation and
optimism over an economic recovery. [US/]
 The two-year bond CA2YT=RR was down 4 Canadian cents to
yield 1.773 percent, while the 10-year bond CA10YT=RR dropped
26 Canadian cents to yield 3.411 percent.
 (Reporting by Claire Sibonney; editing by Peter Galloway)