CANADA FX DEBT-C$ slips on soft data ahead of jobs reports

Thu Jan 6, 2011 5:01pm EST
 
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 * C$ dips to $1.0031
 * Currency has traded above parity for 8 straight sessions
 * Bonds drift higher across curve
 * Canada, U.S. jobs figures are Friday's focus
 (Updates to close)
 By Ka Yan Ng
 TORONTO, Jan 6 (Reuters) - Canada's dollar dipped slightly
against its U.S. counterpart on Thursday, weighed by soft North
American data and retreating commodity prices.
 A report showed new U.S. claims for jobless benefits moved
higher last week, though a decline in the four-week average to
a nearly 2-1/2-year low suggested the trend toward a better
labor market remains intact. [ID:nN06111595]
 It was followed by a report that showed Canadian purchasing
activity stalled in December. [ID:nN06112363]
 The Canadian currency had benefited from increased optimism
about the U.S. economic recovery, which was boosted by
surprisingly firm private employers jobs data out this week.
The United States is Canada's largest trading partner and a
pickup in demand there could boost the export sector.
 Still, the Canadian dollar CAD=D4  finished above parity
with the U.S. dollar for a fourth straight session, ending at
C$0.9969 to the U.S. dollar, or $1.0031. This compared with
Wednesday's close at C$0.9964 to the U.S. dollar, or $1.0036.
 Analysts said the market was now firmly focused on U.S. and
Canadian jobs data out on Friday. [ID:nN31145126]
 "The market has taken back some of the long Canada
positions ahead of tomorrow's payroll numbers," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
 A drop in commodity prices -- with oil off more than 2
percent to below $89 a barrel -- also temporarily put a lid on
the Canadian dollar's gains, said Spitz.
 He said the Canadian dollar could extend its recent rally
should the domestic employment figures come in at or above
expectations. The Canadian dollar has traded above parity for
the last eight sessions.
 Activity against other major currencies has also been
notable, analysts say.
 "If North American consumer growth or economic growth is
going to be stronger, then that provides some optimism for the
export environment vis-a-vis Canada, and that's helping the
currency," said Jeremy Stretch, head of currency strategy at
CIBC World Markets in London.
 "But I think it's more the case that Canada is going to
gain more traction against some of the crosses,"
 Stretch said performance against the euro and Australian
dollar should be particularly interesting in the near term due
to negative structural issues in Europe and Canada's recent lag
against its Aussie commodity counterpart.
 BOND PRICE EDGE UP
 Canadian bond prices drifted higher, tracking U.S.
Treasuries up, with yields coming off highs reached the
previous day after the strong jobs data.
 A risk-off sentiment prevailed as stock markets retreated
on the poor economic data, which also included disappointing
December sales from some top U.S. retailers.
 The two-year bond CA2YT=RR rose 4 Canadian cents to yield
1.742 percent, while the 10-year bond CA10YT=RR added 45
Canadian cents to yield 3.224 percent.
 Statistics Canada will release the employment data Friday
at 7 a.m. (1200 GMT). The average forecast in a Reuters poll
was for more modest job growth in December of 17,500 as the
pace of hiring slowed from earlier in the year. ECONCA
 U.S. employers likely stepped up hiring in December, with
expectations of 140,000 jobs created, after adding a meager
39,000 jobs in November. [ID:nN04179015]
  (With additional reporting by Claire Sibonney; editing by
Jeffrey Hodgson)