CANADA FX DEBT-C$ extends gain, bonds down after jobs data
* C$ steadies near session high at $1.0094
* Bonds weighed by firm Canada jobs, forecasts on US data
* Canada adds more jobs than expected in December (Adds details)
TORONTO, Jan 7 (Reuters) - The Canadian dollar stretched early gains to steady near its session high against the greenback in volatile trade on Friday after a pair of mixed North American jobs reports.
Canada's dollar, which rose on the back of strong domestic jobs numbers, pared gains on the news that the U.S. economy created far fewer jobs than expected. But it recovered and climbed as the U.S. unemployment rate dropped to its lowest in more than 1-1/2 years. For details see [ID:nN06134458].
"It's quite volatile right now ... I think the market is having a bit of a tricky time interpreting some of the conflicting signals," said David Tulk, senior macro strategist at TD Securities.
The Canadian dollar CAD=D4 reached C$0.9899 to the U.S. dollar, or $1.0102, rising from Thursday's North American session close at C$0.9969 to the U.S. dollar, or $1.0031. By 9:15 a.m. (1315 GMT) the currency was at C$0.9907 to the U.S. dollar, or $1.0094.
The currency was already heading higher after retreating to C$1.0004 to the U.S. dollar, or 99.60 U.S. cents overnight.
It firmed as data showed the domestic economy added 22,000 jobs in December compared with 15,200 in November, and more than the 17,500 forecast. The unemployment rate held steady at 7.6 percent for a second month. For details see [ID:nnSCL7CE78A].
"Overall it's a supportive report for the Canadian dollar. Again, it's not a barn-burner report like we saw in the first half of the year but it's solid and that's a positive surprise because most Canadian employment reports recently have been on the soft side of expectations," said Doug Porter, deputy chief economist at BMO Capital Markets.
The jobs figures will not likely persuade the Bank of Canada to hike interest rates this month, but suggests the central bank may raise rates sooner than some expect.
Expectations remained firm, as measured by a Reuters calculation of yields on overnight index swaps, that the Bank of Canada will likely keep interest rates unchanged at its next rate decision on Jan. 18. BOCWATCH
The central bank halted its rate-hiking campaign after three successive increases last year in part to gauge the patchy U.S. recovery.
Canadian government bond prices held lower across the curve after the two rounds of employment data.
The forecast-beating domestic jobs figures kept pressure on the sector, as it suggested further underlying strength in the economy and the potential for interest rate hikes. But prices nearly gave back all the declines after the U.S. data. Canada's government bonds continued to underperform their U.S. counterparts.
The interest-rate sensitive two-year bond CA2YT=RR fell 2 Canadian cents to yield 1.754 percent, while the 10-year bond CA10YT=RR was off 2 Canadian cents to yield 3.226 percent. (Reporting by Ka Yan Ng and Claire Sibonney; Editing by James Dalgleish)
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