CANADA FX DEBT-C$ jumps, bonds fall after big Canada jobs gain

Fri May 6, 2011 8:12am EDT
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 * Canada economy adds 58,300 jobs, more than expected
 * C$ firms to session high, pares gains
 * Bond prices weaken across yield curve
 * Interest rate hikes expected in July at the earliest
 By Ka Yan Ng
 TORONTO, May 6 (Reuters) - Canada's dollar jumped to a
session high against the U.S. dollar on Friday, while bond
prices eased, after data showed Canada's employment picked up
steam in April.
 The economy created far more jobs than expected and
recovered all the full-time positions lost in the recession,
setting the stage for solid second-quarter growth and interest
rate hikes later this year.
 Net job creation totaled 58,300 in the month, Statistics
Canada said on Friday, exceeding the forecast in a Reuters poll
of a 22,500 gain. Details of the report were less impressive as
most of the job creation was in part-time positions and in the
services sector where wages tend to be lower. [ID:nN06228750]
 The domestic jobs data reinforces market expectations the
Bank of Canada will see no need to resume hiking interest rates
until July at the earliest, following three increases last year
to 1.0 percent.
 "The bigger issue for the Bank of Canada is the sharp
downward correction in the whole risk trade," said Derek Holt,
economist at Scotia Capital, noting that the recent sharp
reversal in commodity prices will ease up on some some of the
global inflationary pressures.
 "That's by far the more important factor I think."
 He said this could explain why the Canadian dollar's
initial reaction was to firm mildly -- rising 35 ticks to a
session high at C$0.9600 -- but then erase that gain on second
 The commodity-linked currency, however, was still firmer
from the previous session's close even as the price of oil fell
further on Friday.
 At 7:53 a.m. (1153 GMT), the Canadian dollar CAD=D4 was
at C$0.9644 to the U.S. dollar, or $1.0369, up from Thursday's
finish at  C$0.9682 to the U.S. dollar, or $1.0328.
 The currency slumped to its lowest level against the U.S.
dollar in more than two weeks on Thursday as the wave of
selling across commodity markets accelerated on weak economic
data and a discouraging outlook.
 Overnight index swaps, which trade based on expectations
for the key central bank rate, showed investors slightly
increasing bets on rate hikes throughout the rest of 2011 just
after the data was published.
 The two-year bond CA2YT=RR, which is especially sensitive
to Bank of Canada interest rate moves, slid 7 Canadian cents to
yield 1.697 percent.
 "Twos did certainly sell off a bit. I think that's probably
where you'll see the move, primarily in the front end," said
said David Tulk, chief Canada macro strategist at TD
 Attention now shifts to the U.S. nonfarm payrolls, due at
8:30 a.m. The report is expected to show the U.S. economy
created 186,000 jobs last month, according to a Reuters survey
of economists. In March payrolls rose by 216,000 which was the
biggest increase in 10 months.
 (Reporting by Ka Yan Ng)