June 5, 2009 / 2:41 PM / in 8 years

CANADA FX DEBT-C$ loses ground, bonds mixed after jobs data

* C$ at 89.69 U.S. cents

* Bonds mixed on see-sawing stocks, jobs data

* Canada sheds 41,800 jobs, jobless rate rises to 8.4 pct

* U.S. nonfarm payrolls fall 345,000, jobless rate up (Adds details)

By Ka Yan Ng

TORONTO, June 5 (Reuters) - The Canadian dollar was weaker against the U.S. currency on Friday morning after Canadian and U.S. jobs figures painted a mixed picture of the progress of two economies as they try to emerge from recession.

Canada lost more jobs than expected in May, while the U.S. data showed the most definitive evidence yet that that economy’s severe weakness was diminishing.

Canada shed about 42,000 jobs in May and the unemployment rate surged to an 11-year high at 8.4 percent from 8.0 percent in April. [ID:nN05253705]. In the United States, employers cut 345,000 jobs last month, the fewest since September and far fewer than forecast, spurring gains in the U.S. dollar. The U.S. unemployment rate, however, raced to 9.4 percent from 8.9 percent in April. [ID:nN05274048]

At 10:10 a.m. (1410 GMT), the Canadian unit was at C$1.1149 to the U.S. dollar, or 89.69 U.S. cents, down sharply from C$1.0968 to the U.S. dollar, or 91.17 U.S. cents, at Thursday’s close.

“The price action has been choppy and erratic at best. The payroll numbers have had their due influence. The Canada number, on balance was (Canadian-dollar) negative, but overlooked in light of the U.S. number,” said Jack Spitz, managing director of foreign exchange at National Bank Financial.

He said the U.S. data was initially seen as greenback-positive, and he also cited comments by Atlanta Federal Reserve President Dennis Lockhart as having an influence.

Lockhart said in an interview published on Friday that the U.S. Federal Reserve needs to be “anticipatory” and not wait too long to tighten monetary policy. He said that with rising market concerns about inflation, he could envision the Fed eventually raising U.S. benchmark interest rates while continuing to run an expansionary monetary policy. [ID:nL5716226]

“Lockhart’s comments have had as much if not more of a reaction in capital markets than the payroll numbers themselves,” Spitz said.

The Canadian jobs data was worse than expected and comes as an unprecedented rally in the Canadian dollar hammers manufacturers. The Bank of Canada sounded the alarm about the currency’s rise on Thursday by stating that a sustained rally in the currency could undermine recent significant improvements in economic conditions. [ID:nN0479627]

“I assume it’s slightly Canadian dollar-negative to the degree that the (jobs) numbers were technically worse than expected,” said Eric Lascelles, chief economics and rates strategist at TD Securities.

“For the Bank of Canada, I don’t know if there’s anything all that profound. Anyone was dreaming in Technicolor if they thought we were going to continue to see 36,000 job gains on a monthly basis. The realist would have expected a return back to this sort of outcome.”

Canada gained about 36,000 jobs in April.

BONDS MIXED

Canadian bond prices were mixed, with the short end lower and the long end edging higher, as market players absorbed the jobs figures and the see-sawing of equity markets.

The benchmark two-year government bond was off 11 Canadian cents at C$100.05 to yield 1.224 percent, while the 10-year bond was up 5 Canadian cents at C$102.95 to yield 3.399 percent.

The 30-year bond gained 35 Canadian cents to C$117.15 to yield 3.978 percent. The comparable U.S. Treasury issue yielded 4.575 percent. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)

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