CANADA FX DEBT-C$ pushes higher on jobs data rethink
* 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"The Canadian numbers weren't great but they were superseded by the horrible U.S. numbers.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)
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