CANADA FX DEBT-C$ fails to sustain rallies and ends flat

Fri Mar 4, 2011 4:47pm EST
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 * C$ finishes at C$0.9717, flat on the week
 * Bonds firm as U.S. stocks slide
 (Adds details)
 By Ka Yan Ng
 TORONTO, March 4 (Reuters) - The Canadian dollar CAD=D4
steadied against the greenback and closed little changed on
Friday after some data-related volatility early in the day.
 The currency rallied in the morning following the release
of data that showed a surge in U.S. employment last month,
suggesting the U.S. economic recovery has gathered speed. There
was also a pop after Canada's Ivey Purchasing Managers Index
jumped to 69.3 in February from 41.4 in January. Analysts had
expected a reading of 51.7.
 Both rallies were short-lived.
 Michael O'Neill, managing director at Knightsbridge Foreign
Exchange, said the Canadian dollar failed to sustain its gains
because it was being sold in cross-trading, especially against
the strengthening euro. "The Canadian dollar is torn," he
 The euro has charged higher since European Central Bank
President Jean-Claude Trichet hinted on Thursday at an interest
rate rise in April. Against the greenback, it broke above the
psychologically important $1.40 level. [FRX/]
 Support for the Canadian currency continued to come from
prices for oil, a major Canadian export, which rose as
intensified fighting between loyalists to Libya's Muammar
Gaddafi and a rebel army seeking to dislodge him from power
spurred more worries about supply disruptions. [O/R]
 The Canadian dollar rose as high as C$0.9699 to the U.S.
dollar, or $1.0310, but cut gains to finish at C$0.9717 to the
U.S. dollar, or $1.0291. That was up a few ticks from
Thursday's North American finish of C$0.9722 to the U.S.
dollar, or $1.0286.
 The currency has been locked in a range of C$0.97 to C$0.98
for most of the past six sessions, with only brief forays
outside that band.
 For the week, the Canadian dollar was little changed, up
0.03 percent.
 The release of U.S. nonfarm payrolls figures for February
was Friday's main event and they showed an increase of 192,000.
That was above market expectations for 185,000 jobs, and data
for December and January was revised higher as well. The
unemployment rate dipped to 8.9 percent from 9 percent, its
lowest level since April 2009 . [ID:nOAT004757]
 While U.S. jobs showed momentum, economists said the U.S.
Federal Reserve will want to see payroll gains in excess of
200,000 for at least six to nine months and a significant
decline in unemployment before starting to withdraw its massive
monetary support from the economy.
 "The report is basically good news, but more or less as
expected. Maybe seeing a decent number for a change gave a
little boost of optimism just for a second," said Benjamin
Reitzes, economist at BMO Capital Markets.
 Reitzes said the drop in the unemployment rate was unlikely
to be sustainable over the next few months.
 Canadian government bond prices were mildly firmer across
the curve, following U.S. Treasuries, as U.S. stock markets
were sharply lower.
 U.S. equities erased all of the gains they made this week
on Friday as fears of more geopolitical turmoil and the impact
of high oil prices drove investors to sell risky assets and
shift into bonds. [.N]
 The two-year bond CA2YT=RR gained 8 Canadian cents to
yield of 1.840 percent, while the 10-year bond CA10YT=RR
added 54 Canadian cents to yield 3.329 percent.
 (Reporting by Solarina Ho and Ka Yan Ng; editing by Peter