CANADA FX DEBT-C$ slides as domestic jobs data disappoints

Fri Aug 7, 2009 4:31pm EDT
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 * 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.
 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.