CANADA FX DEBT-Jobs data knocks more than a cent off C$

Fri Aug 6, 2010 4:48pm EDT
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   * C$ ends at 97.29 U.S. cents
 * Bond prices rise as rate hike expectations ease
 * Canada economy loses 9,300 jobs, first job loss of 2010
 * U.S. July payrolls fall, jobless rate holds steady
 (Updates to close)
 By Ka Yan Ng
 TORONTO, Aug 6 (Reuters) - The Canadian dollar tumbled more
than a penny to a one-week low against the U.S. currency on
Friday, while government bonds climbed as weak Canadian and
U.S. job reports for July suggested a softening economic
 The currency fell after a Canadian employment report showed
the economy posted its first monthly job losses of the year,
then extended its decline after data showed U.S. employment
fell for a second straight month.
 The weak employment data helped knock the Canadian currency
CAD=D4 as low as C$1.0307 to the U.S. dollar, or 97.02 U.S.
cents, its lowest level in a week.
 The currency remained near its low as U.S. equities stayed
soft. It closed at C$1.0279 to the U.S. dollar, or 97.29 U.S.
cents, a sharp reversal from Thursday's finish at C$1.0166 to
the U.S. dollar, or 98.37 U.S. cents. It hit a 13-week high
against the greenback on Thursday.
 "It's coming a bit back down to earth," said David Tulk,
senior macro strategist at TD Securities. "It's tricky to
figure out why exactly the Canadian dollar is being hurt as
badly as it was, other than just returning some of the strength
earlier in the week."
 He said the domestic employment data had some decent
details compared with the U.S. report.
 Statistics Canada said the economy lost 9,300 jobs in July,
after robust job creation in the first half of the year had
recovered nearly all the jobs loss during the recession. The
unemployment rate unexpectedly rose to 8 percent from 7.9
percent. Analysts in a Reuters poll had predicted an increase
of 15,000 jobs after a strong gain of 93,200 in June.
 By contrast, U.S. non-farm payrolls fell 131,000, against
expectations for a 65,000 decline, while the unemployment rate
was unchanged at 9.5 percent in July. [ID:nN05598486]
 The increased uncertainty about the U.S. economic recovery,
highlighted by the recent rough patch of U.S. data, has spilled
over to the outlook for the Canadian dollar.
 "What helped the Canadian dollar earlier this year is now
weighing on the Canadian dollar. We're underperforming our
commodity and cyclically sensitive peers," said David Watt,
senior fixed income and currency strategist at RBC Capital
 Canadian bond prices were firmer across the curve after the
domestic jobs data, which added to recent evidence that the
country's recovery is starting to slow.
 Softer U.S. equities also contributed to investors favoring
the safety of government bonds.
 Analysts said the Canadian job figures should keep the Bank
of Canada on track for a quarter-point interest rate rise on
Sept. 8, to follow two hikes of the same size in the past two
 But market pricing, as measured by yields on overnight
index swaps, fell to around 59 percent chance of a rate
increase, compared with about 68 percent before the jobs
report. BOCWATCH
 "I think the Bank of Canada will realize that the three-,
six-month moving average is still quite healthy. It's not one
single report that will put doubt in Governor (Mark) Carney's
mind," said Sebastien Lavoie, assistant chief economist at
Laurentian Bank Securities.
 "It's still easy for the bank to hike on Sept. 8 given the
level of the overnight rate is so low."
 The U.S. jobs data will likely keep debate alive on whether
more easing is needed there. The next U.S. Federal Reserve
policy-setting meeting is on Tuesday.
 The two-year bond CA2YT=RR  was up 15 Canadian cents to
yield 1.442 percent, while the 10-year bond CA10YT=RR gained
43 Canadian cents to yield 3.074 percent.