CANADA FX DEBT-C$ pushes higher on jobs data rethink

Fri Oct 8, 2010 1:37pm EDT
 
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 * C$ turns higher after data-inspired big swings
 * Canada loses 6,600 jobs in Sept, details soothe
 * Bond prices mostly up after poor reading on U.S. jobs
 (Updates to midday)
 By Ka Yan Ng
 TORONTO, Oct 8 (Reuters) - The Canadian dollar turned
higher against a generally softer U.S. currency on Friday as a
second look at the details of Canada's September jobs report
and the results of a Bank of Canada business-sentiment survey
eased fears that the country's economic recovery had stalled.
 Data on Friday showed the Canadian economy was gearing down
after a fast start at the beginning of the year, but the market
still found room for optimism, especially since the U.S.
Federal Reserve looked on the verge of offering more stimulus
after data showed the U.S. economy shed more jobs than expected
in September.
 At 1:10 p.m. (1710 GMT), the Canadian dollar CAD=D4 was
at C$1.0136 to the U.S. dollar, or 98.66 U.S. cents, recovering
from a low of C$1.0238 to the U.S. dollar, or 97.68 U.S. cents,
hit on first sight of the domestic jobs data, which showed the
economy had lost 6,600 jobs.
 It was also up from Thursday's close of C$1.0185 to the
U.S. dollar, or 98.18 U.S. cents.
 "The Canadian numbers weren't great but they were
superseded by the horrible U.S. numbers. The market is taking
this as a sign that the Fed will have to embark on another
round of quantitative easing, thereby providing a greater
access to cheap funds," said John Curran, senior vice president
at CanadianForex.
 "So people are adding risk to their profiles."
 Riskier assets such as stocks and crude oil were also
higher, helping to influence the Canadian dollar's rise.
 Earlier this week, the currency hit a five-month high and
got the market talking again about parity with the U.S. dollar.
But it could be a slow climb towards testing parity and in the
short term the Canadian dollar is likely to underperform
against the crosses.
 "I don't think necessarily you can make a strong case to
suggest the Canadian dollar is going to appreciate dramatically
against the U.S. dollar, although the (U.S.) dollar generally
is still likely to remain on the defensive while the risks of
more (quantitative easing) remain," said Shaun Osborne, chief
currency strategist at TD Securities.
 "We still expect the Canadian dollar to underperform on the
crosses and that should limit the amount of upside the Canadian
dollar has against the U.S. dollar for the moment."
 CANADIAN ECONOMY SLOWING
 Economists said the details in the Canadian jobs report
were not as soft as the overall loss of jobs would suggest, but
the data was still sufficient to keep views steady that the
Bank of Canada will refrain from raising interest rates later
this month.
 The unemployment rate actually edged down to 8.0 percent in
September from 8.1 percent in August, while full-time jobs
rose. Wage growth was also up in the month.
 "Overall this report is not disastrous. Certainly it
supports the growing market participants' view out there that
the Bank of Canada will take a pause (from raising rates) on
Oct. 19," said Sebastien Lavoie, assistant chief economist at
Laurentian Bank Securities.
 The market is pricing in nearly a 90 percent likelihood
that the central bank will hold rates at 1 percent later this
month, based on a Reuters calculation of yields on overnight
index swaps. BOCWATCH
 But the downbeat headline of a jobs loss for the month does
add to a raft of recent statistics showing the Canadian economy
is slowing down after a swift start to the year.
 Data on Friday also showed Canadian housing starts fell 1.5
percent in September, marking the fourth monthly decline in the
five months. Separately, however, two Bank of Canada surveys
showed businesses were positive about future sales, investment
and hiring, but expect economic growth to be modest.
[ID:nN08225464]
 Canadian government bond prices were mostly higher after
the U.S. nonfarm payrolls report, which showed the U.S. economy
shed 95,000 jobs in September. [ID:nN08205203]
 The two-year bond CA2YT=RR was down 2 Canadian cents to
yield 1.344 percent, while the 10-year bond CA10YT=RR
advanced 50 Canadian cents to yield 2.693 percent.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)