CANADA FX DEBT-C$ slides as domestic jobs data disappoints
* C$ ends as C$1.0823 per US$, or 92.40 U.S. cents
* Currency exits week down 0.4 percent
* Canada sheds 44,500 jobs in July
* Bond prices lower across curve (Recasts, updates to session close)
By Frank Pingue
TORONTO, Aug 7 (Reuters) - Canada's dollar finished lower versus the U.S. greenback on Friday as weak domestic jobs data soured investor risk appetite and briefly sent the currency to its lowest level in a week.
The slide followed a report that showed the Canadian economy shed 44,500 jobs in July, more than double the market forecast. [ID:nN07253705]
The report knocked the Canadian currency as low as C$1.0865 to the U.S. dollar, or 92.04 U.S. cents, its lowest level since July 30. That was down from C$1.0785 to the U.S. dollar, or 92.72 U.S. cents, shortly before the numbers came out.
The currency briefly recouped all those losses as investors returned to riskier assets when U.S. data showed employers cut fewer jobs in July than expected and the lowest number in any month since last August. [ID:nN06337602]
But the rebound was short-lived as the U.S. dollar began to react positively to supportive U.S. economic data after months of falling in the wake of favorable reports that only served to lessen its safe-haven appeal.
"The knee-jerk reaction to sell the Canadian dollar was no surprise since the (domestic) data was a disappointment," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "But the the domestic data was overshadowed by the U.S. data and the global flow ... and it was somewhat of a catalyst to square up short (U.S.) dollar positions."
The Canadian dollar closed at C$1.0823 to the U.S. dollar, or 92.40 U.S. cents, down from C$1.0767 to the U.S. dollar, or 92.88 U.S. cents, at Thursday's close.
The currency ended the week down 0.4 percent, as it could not hang on to gains recorded early in the week when it topped 94 U.S. cents en route to its highest level in over 10 months.
If Friday's session is any indication, the currency could be in for more selling if U.S. economic data continues to offer evidence that the health of the world's largest economy is starting to improve.
"We're going to have to take a step back ... and decide whether or not good news and better data are going to start to mean better days for the U.S. dollar," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"At some point that's got to change back to the way it was and the way it should be: good news and data in the U.S. should be good for the U.S. dollar and good news in Canada should be good news for the Canadian dollar."
Some Canadian data, such as retail figures and home sales, have shown the economy is healing, and the Bank of Canada and most private-sector economists say the economy will start to grow in the third quarter. The central bank projects 1.3 percent growth in the July-September period after three quarters of contraction.
BOND PRICES END LOWER
Canadian bond prices ended lower across the curve alongside the bigger U.S. Treasury market in the wake of the U.S. jobs report, which hinted that the labor market in the United States is less impaired than previously thought.
"Obviously it was just the pressure coming from the U.S. since the payrolls number out of the U.S. was a bit stronger than expected," said Michael Gregory, senior economist BMO Capital Markets.
"So I believe that we are going to have upward pressure on yields for the next several days as we get optimistic economic data combined with (U.S.) supply and that's just going to ripple across the border."
Due next week in the United States are the U.S. Treasury's auctions of $75 billion in three- and 10-year notes, along with 30-year bonds. The total of the auctions is a record size for a quarterly refunding.
The two-year Canadian bond ended down 4 Canadian cents at C$99.05 to yield 1.473 percent, while the 10-year bond slipped 55 Canadian cents to C$101.10 to yield 3.615 percent.
The 30-year bond dropped 95 Canadian cents to C$115.30 to yield 4.075 percent. In the United States, the 30-year bond yielded 4.612 percent.
Canadian bonds outperformed their U.S. counterparts across the curve. The Canadian 30-year bond was about 53.8 basis points below the U.S. 30-year yield, versus about 51.3 basis points below on Wednesday.
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