CANADA FX DEBT-C$ rallies after strong Canadian, US job gains

Fri May 6, 2011 9:36am EDT
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 * Canada added 58,300 jobs; more than twice expected
 * US payrolls up 244,000, largest in 11 months
 * C$ firms to C$0.9573 vs US$, or $1.0446, after U.S. data
 * Bond prices extend losses across yield curve
 * Interest rate hikes expected in July at the earliest
 (Updates after U.S. jobs data)
 By Claire Sibonney
 TORONTO, May 6 (Reuters) - Canada's dollar jumped against
the U.S. currency on Friday, reversing its recent selloff on
the back of plunging commodity prices, after jobs reports from
both sides of the border blew past expectations.
 The currency CAD=D4 firmed to a session high of C$0.9573
versus the U.S. dollar, or $1.0446, shortly after data that
showed U.S. nonfarm payrolls rose 244,000 last month, the most
in 11 months. [ID:nOAT004799]
 "CAD is outperforming, it's a good way to play strength in
the U.S. economy," said Elsa Lignos, G10 currency strategist at
RBC Capital Markets in London.
 "No denying that this is a very firm payrolls report and we
still favor long CAD positions, particularly as we head into
the May 31 Bank of Canada meeting where we think they're going
to start laying the ground for hikes beginning in July."
 The Canadian dollar was already on solid footing compared
to Thursday's close, following the country's own upside
surprise in employment figures. [ID:nN06160819]
 Canada's 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.
 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
that brought its key policy rate to 1.0 percent.
 At 9:13 a.m. (1313 GMT), the Canadian dollar CAD=D4 was
at C$0.9585 to the U.S. dollar, or $1.0433, up sharply 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. BOCWATCH
 Canadian bond prices extended losses across the curve,
tracking U.S. Treasuries lower after the strong U.S. jobs data
tempered anxiety that the economic recovery there is
sputtering. [US/]
 The yield on the two-year Canadian government bond
CA2YT=RR, which is especially sensitive to Bank of Canada
rate moves, rose to 1.742 percent from 1.666 percent just
before the Canadian jobs report.
 The 10-year bond CA2YT=RR lost 55 Canadian cents to yield
3.256 percent.
 (Additional reporting by Ka Yan Ng; editing by Jeffrey