Canadian dollar rallies on strong Canada jobs data
* Canada dollar up 0.6 pct, but down 0.1 pct for the week
* Currency helped by news of rebound in Canada jobs market
* Bond prices end mixed on data and late stock rally
By John McCrank
TORONTO, Sept 5 (Reuters) - The Canadian dollar rose 0.6 percent against the U.S. dollar on Friday after Canadian jobs figures for August came in slightly stronger than the market had expected, easing concerns about the state of the country's economy.
Domestic bond prices were mixed, as a less-gloomy economic scenario had investors unwinding bets, which helped knock the yield on Canadian 30-year government bonds to an all-time low.
The Canadian unit ended the North American session at C$1.0633 to the U.S. dollar, or 94.05 U.S. cents, up from C$1.0695 to the U.S. dollar, or 93.50 U.S. cents, at Thursday's close.
For the week, the Canadian dollar ended down 0.1 percent, largely on the back of a slide in oil prices, but for the day, it was the strongest performer among the G10 currencies.
A report that showed 15,200 Canadian jobs were created in August, nearly double market expectations, spurred the rally.
The gains for August contrasted with the previous month, when 55,000 jobs were shed, the biggest monthly loss since the 1991 recession.
The August report also showed less pressure on inflation from wage gains and an unchanged unemployment rate at 6.1 percent.
"More importantly than the number being slightly better than expected was the fact that these days, in the rest of the world and to some extent the U.S., better-than-expected numbers on important data releases are very rare," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"It also confirms the Bank (of Canada's) view of the economy that domestic spending might be modestly weaker, but it's still strong."
Strauss said gains in the Canadian currency were limited by a drop in oil prices below $107 a barrel, as Canada is a major oil exporter.
BOND PRICES MIXED
Canadian bond prices were mixed in volatile trading as stock markets rallied late in the session, causing the bond market to unwind a safe-haven bid.
The Canadian job numbers also played a role in the mixed results, as they lessened the likelihood of a Bank of Canada interest rate cut in 2008, said Sheldon Dong, fixed income strategist at TD Securities.
"Basically, people probably got too bullish at the front end of the curve and they're sort of unwinding that trade, so that's why the short-end yields have backed up a bit," he said.
"The markets have moved on from the inflationary fears to (concerns of) a global recession, so, that's another reason, I think, why the long end has done well."
Canadian 30-year government bond prices rose, pushing yields to an all time low. Bond yields and prices move in opposite directions.
The two-year bond dropped 4 Canadian cents to C$100.09 to yield 2.708 percent, while the 10-year gained 3 Canadian cents to C$106.58 to yield 3.447 percent.
The yield spread between the two-year and 10-year bond was 76.0 basis points, down from 77.0 basis points at the previous close.
The 30-year bond added 39 Canadian cents to C$118.24 for an all-time low yield of 3.934 percent. In the United States, the 30-year Treasury yielded 4.274 percent.
The three-month when-issued T-bill yielded 2.40 percent, down from 2.43 percent at the previous close. (Reporting by John McCrank; Editing by Frank McGurty)
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