CANADA FX DEBT-C$ weakens on oil, U.S. economic data
* C$ weakens as price of oil drops to near $45 a barrel
* Weak U.S. private sector jobs data spurs concern
* Bonds flat to lower amid supply concerns
By Jennifer Kwan
TORONTO, Jan 7 (Reuters) - The Canadian dollar weakened against the U.S. currency on Wednesday morning as the price of oil dropped and bleaker-than-expected U.S. employment data spurred concerns about a deeper recession.
Bonds held up on the short end of the curve on ADP private sector employment data that showed U.S. employers shed 693,000 jobs in December, far more than forecast. [ID:nN07472855] The longer end of the curve was lower, largely due to persistent supply concerns.
At 10:45 a.m. (1545 GMT), the Canadian currency was at C$1.1900 to the U.S. dollar, or 84.03 U.S. cents, down from C$1.1828 to the U.S. dollar, or 84.55 U.S. cents, on Tuesday.
"The driver on the weakness on the C$ would be a dimming prospect for the U.S. economy," said Michael Gregory, senior economist at BMO Capital Markets.
After Wednesday's U.S. figures, investors were bracing for Friday's release of government employment data December from both sides of the border.
"Perhaps a lot of people are revising down their projections for (U.S.) payrolls on Friday and, as a result, are probably also marking down their forecasts or hedging their bets a little bit that the Canadian numbers will also be weaker than expected," Gregory said.
The market expects Canada to have shed 22,000 jobs in December. That would follow a loss of 70,600 jobs in November.
In recent sessions, the Canadian currency has been boosted by a rise in oil prices. Earlier on Wednesday, crude climbed towards $49 a barrel but it then turned negative on economic concerns and U.S. data showing a big supply build.
Fluctuations in the oil price often sway the currency as Canada is a major oil producer and exporter.
BONDS FLAT TO LOWER
With no major Canadian data on Wednesday the longer end of the bond market followed U.S. Treasuries, which remained lower on persistent concerns about swelling supply. [ID:nN07333759]
After the U.S. employment data on Wednesday, the market will likely remain cautious for the remainder of the week, said Paul Ferley, assistant chief economist at Royal Bank of Canada.
The two-year bond was flat at C$103.00 to yield 1.138 percent, while the 10-year bond fell 45 Canadian cents to C$110.85 to yield 2.920 percent.
The yield spread between the two-year and 10-year bond was 176 basis points, versus 175 at the previous close.
The 30-year bond fell C$1.00 to yield 3.686 percent. In the United States, the 30-year treasury yielded 3.0457 percent. (Reporting by Jennifer Kwan; editing by Peter Galloway)
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