CANADA FX DEBT-C$ hits greenback parity on U.S. jobs data

Fri Nov 5, 2010 4:51pm EDT
 
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 * C$ hits high of $1.0004, closes at 99.96 U.S. cents
 * U.S. payrolls surge, Canada jobs report softer
 * Bonds weaker in reaction to employment data
 (Updates to close, adds comments)
 By Claire Sibonney
 TORONTO, Nov 5 (Reuters) - The Canadian dollar rose to
parity with the greenback on Friday after figures showing a
surge in U.S. hiring lifted sentiment and the market found some
solid details in a soft Canadian jobs report.
 The currency CAD=D4 touched as high as 99.92 Canadian
cents to the U.S. dollar, or $1.0008, after the strong U.S.
jobs data, which added to the Canadian-dollar momentum
generated by the U.S. Federal Reserve's pledge on Wednesday to
pump billions more dollars into the U.S. economy.
 It was the Canadian dollar's highest level since it last
reached U.S. dollar parity three weeks ago.
 "I don't think (parity) has quite the same cache as it did
a few years ago but it's still a notable event," said Eric
Lascelles, chief Canada macro strategist at TD Securities.
 The jobs data lifted equities and resource prices, which
support commodity currencies such as the Canadian dollar. But
the main driver of the Canadian dollar's rise has been the
broad weakness in the U.S. dollar leading up to, and in the
wake of, the Fed's move.
  The Canadian currency dipped briefly early on Friday after
data showed Canada's economy added far fewer jobs than
forecast. But it quickly pared losses as details of the report
were seen as being more favorable. Positive signals included a
drop in the unemployment rate and more full-time and
private-sector hiring. [ID:nN05138916]
 "The pieces of the puzzle fit together really quite nicely
today ... the outlier is the fact that the U.S. dollar is up
versus most other currencies," Lascelles added.
 "Part of that is that our employment report, when you got
down to the bones of it, was actually pretty decent looking."
  The Canadian dollar came very close to trading at par with
its U.S. counterpart earlier this week but was undermined by
Ottawa's decision to block BHP Billiton's (BHP.AX: Quote) $39 billion
takeover bid for Potash Corp (POT.TO: Quote). [ID:nN04255002]
 The currency CAD=D4 finished Friday at C$1.0004 to the
U.S. dollar, or 99.96 U.S. cents, up from Thursday's close at
C$1.0024 to the U.S. dollar, or 99.76 U.S. cents. It was up 2
percent for the week.
 Firas Askari, head of foreign exchange trading at BMO
Capital Markets, said the next resistance level for the
Canadian dollar is October's high of 99.80 Canadian cents to
the U.S. dollar, or US$1.002.
 Askari said large European banks acting on behalf of hedge
funds, money managers and international pension plans were
buying Canadian dollars, while large domestic banks
representing corporate Canada were selling Canadian dollars to
buy the greenback.
 The currency pushed above parity last month for the first
time since April, but lacked conviction, partly because the
Bank of Canada's October policy statement was more dovish than
some had expected.
 This time, market watchers are predicting more sustained
strength. "I don't see any reason the Canadian dollar needs to
retreat right now," said TD's Lascelles. [ID:nN03102293]
 Canadian bond prices were weaker following both sets of
employment data as the optimistic signals for the economy
erased some of the safe-haven appeal of government debt.
 The two-year bond CA2YT=RR was off 13 Canadian cents to
yield 1.475 percent, while the 10-year bond CA10YT=RR slipped
35 Canadian cents to yield 2.856 percent.
 "It's been a pretty solid sell-off across the curve and a
bit of flattener as well for Canada and the motivation again
has been strong Canadian and U.S. data," Lascelles added.
 (Editing by Peter Galloway)