Canadian dollar flat after jobs data, bonds mixed

Fri Jun 6, 2008 10:15am EDT
 
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 * 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)