Canadian dollar flat after jobs data, bonds mixed
* Canadian dollar flat after Canada, U.S. jobs reports
* 8,400 Canadian jobs created in May, 6.1 pct unemployment
* Bond prices mixed after the data
TORONTO, June 6 (Reuters) - The Canadian dollar was almost unchanged against the U.S. dollar on Friday morning as traders ignored a tepid Canadian jobs report and were unsure about the implications of U.S. data that showed a big jump in unemployment, which may be a signal that the U.S. Federal Reserve's easing cycle still has legs.
Canadian bond prices were mixed.
At 9:44 a.m. (1344 GMT), the Canadian dollar was at C$1.0174 to the U.S. dollar, or 98.29 U.S. cents, up from C$1.0178 to the U.S. dollar, or 98.25 U.S. cents, at Thursday's close.
The currency bounced around within a few tenths of a cent on either side of Thursday's closing rate, but lacked a definite direction after the employment reports.
"It's one of those situations where people are uncertain where to take the Canadian dollar," said David Watt, senior currency strategist at RBC Capital Markets.
"Do we go with the commodity story, which might be running out of steam, even though oil is back up, or do you look at the fundamentals of the Canadian economy, which are deteriorating, and our biggest trading partner is looking like it's still going to go through a world of hurt?"
Job growth in Canada eased in May after four months of red-hot increases as full-time employment dropped, signaling a cooling economy and supporting expectations of a Bank of Canada interest rate cut on Tuesday. See: [ID:nN06309467]
The economy added 8,400 jobs, compared with 10,000 jobs expected, on average, by analysts polled by Reuters.
Employers hired 40,600 part-time workers and dropped 32,200 full-time staff -- the biggest loss of full-time jobs since June 2006. The unemployment rate was unchanged at 6.1 percent.
The Bank of Canada makes its scheduled interest rate announcement on Tuesday. The market is calling for a 25 basis point rate cut by the central bank, to 2.75 percent.
South of the border, the U.S. jobs report showed fewer jobs lost than expected, but the unemployment rate jumped to 5.5 percent, from 5.0 percent, well above the 5.1 percent expected.
"If anything it sort of calls Bernanke out on his statements from Tuesday. Do you really think you can leave rates on hold now that you've got the unemployment rate gapping higher," Watt said.
Bernanke had expressed concern about the effects of a weak U.S. dollar on inflation, suggesting that the interest rate easing cycle in the United States may have come to an end.
Meanwhile, European Central Bank President Jean-Claude Trichet reiterated on Thursday that the ECB is carefully watching inflation, increasing expectations of a rate hike in Europe sooner, rather than later.
"There is a clear cleavage between global central bank stances on monetary policy," said Watt, adding that the Canadian dollar would likely stay within its six-month range of US$1.03 to 97 U.S. cents for the foreseeable future.
BOND PRICES MIXED
Canadian bond prices were mixed, with a modest selloff on the short end, as the Canadian interest rate outlook was little changed, while the U.S. market rallied on the soft unemployment reading.
"Bonds were selling off leading up to the economic data, and they've taken two divergent paths in Canada and the U.S. since then and in the U.S. there was an excuse to stop that selloff, and in Canada there wasn't," said Eric Lascelles, chief economics and rates strategist at TD Securities.
The overnight Canadian LIBOR rate LIBOR01 was at 2.9617 percent, down from 2.9817 percent on Thursday.
Thursday's CORRA rate CORRA= was 2.9966 percent, down from 3.9998 percent on Wednesday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond fell 7 Canadian cents to C$101.59 to yield 2.918 percent. The 10-year bond added 11 Canadian cents to C$102.36 to yield 3.688 percent.
The yield spread between the two-year and 10-year bond was 77.7 basis points, down from 81.8 at the previous close.
The 30-year bond gained 42 Canadian cents to C$114.52 for a yield of 4.135 percent. In the United States, the 30-year Treasury yielded 4.659 percent.
The three-month when-issued T-bill yielded 2.55 percent, up from 2.54 percent from the previous close. (Editing by Peter Galloway)
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