CANADA FX DEBT-C$ sags as US$ gains; jobs data eyed

Thu Oct 7, 2010 4:30pm EDT
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   * C$ ends at 98.18 U.S. cents
 * Charge toward U.S. dollar parity stalls
 * Investors await Canada, U.S. jobs data
 * Bond prices mixed
 (Updates with closing figures, adds quotes)
 By Jennifer Kwan
 TORONTO, Oct 7 (Reuters) - The Canadian dollar retreated
from its recent charge toward parity with the U.S. dollar on
Thursday as the greenback rebounded, while commodity and stock
prices weakened ahead of key employment data due on Friday.
 The U.S. dollar regained some footing after slipping to a
15-year low versus the yen. And, as traders bet momentum had
swung too far, too fast, commodity prices pulled away from
gains that had pushed gold to record highs. [MKTS/GLOB]
 The U.S dollar had been battered in recent sessions on
growing prospects the the Federal Reserve will expand its
purchases of bonds in an effort to keep interest rates low and
stimulate a struggling U.S. economy.
 The Canadian dollar hit a five-month high against the
greenback on Wednesday.
 "The story today isn't necessarily about Canadian dollar
weakness, it's more just U.S. dollar strength," said David
Tulk, senior macro strategist at TD Securities.
 "I think we saw a pretty sizable run forward in the
Canadian dollar the last couple of days so it just seems some
fatigue has set in and investors are re-evaluating their
positions ahead of tomorrow's payrolls report and Canada's jobs
 U.S. nonfarm payrolls for September are expected to be
little changed [ID:nN05187700], while Canada is seen adding
10,000 jobs. [ID:nN01221816]
 "Many people have expected that the labor market is this
key indicator for the Fed to consider quantitative easing,"
said Tulk, referring to the U.S. jobs report.
 "In terms of the market's reaction, they will hop all over
the prospect of a weak data point to suggest that quantitative
easing is imminent. You would see a rally in Treasuries and
probably a rally in equities."
 The Canadian dollar CAD=D4 finished at C$1.0185 to the
U.S. dollar, or 98.18 U.S. cents, down from Wednesday's finish
of C$1.0107 to the U.S. dollar, or 98.94 U.S. cents.
 Oil, a key Canadian export, fell below $82 a barrel and
gold sank from a record high above $1,364 an ounce. [O/R]
 On Wednesday, the Canadian dollar rose as high as C$1.0063
to the U.S. dollar, or 99.37 U.S. cents, its highest level
since April 30.
 Given the power of the recent U.S. dollar selloff, it is
reasonable to expect a pause, said David Watt, senior currency
strategist at RBC Capital Markets. He added that investors may
also be cautious ahead of the imminent start of earnings
season, and ahead of the employment reports.
 Canadian bond prices were in line with U.S. Treasuries,
where the short end gained on anxiety about the upcoming jobs
data and on expectations that the U.S. Federal Reserve will
take steps to make credit easier. [US/]
 "I think it's a quiet day in bond land. There's a certain
amount of positioning ahead of tomorrow's numbers. The bigger
story is what will happen tomorrow," said TD's Tulk.
 The two-year bond CA2YT=RR rose 4 Canadian cents to yield
1.333 percent, while the 10-year bond CA10YT=RR edged 2
Canadian cents lower to yield 2.753 percent.
 (Reporting by Jennifer Kwan; editing by Rob Wilson)