CANADA FX DEBT-C$ rises despite Canadian job losses

Fri Oct 8, 2010 4:38pm EDT
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   * C$ turns higher after U.S. data hits greenback
 * Canada loses 6,600 jobs in Sept, details soothe
 * Bond prices mostly up after poor reading on U.S. jobs
 (Updates with closing figures, adds quotes)
 By Cameron French
 TORONTO, Oct 8 (Reuters) - The Canadian dollar rallied
versus the U.S. dollar on Friday as disappointing U.S. jobs
data prompted traders to look past reports showing weakness in
Canada's housing and labor markets.
 The Canadian dollar initially dipped on a report showing
the country's economy unexpectedly shed 6,600 jobs in
September, but the currency turned around as investors digested
a report that U.S. employers cut 95,000 jobs during the month.
 The U.S. losses, which compared with expectations that
payrolls would remain unchanged, spurred speculation that the
U.S. Federal Reserve would turn to quantitative easing to
stimulate the economy, which would further reduce the yield on
U.S. debt.
 "The overriding theme is selling U.S. dollars across the
board," said Jack Spitz, managing director of foreign exchange
at National Bank Financial.
 The Canadian dollar CAD=D4 finished at C$1.0113 to the
U.S. dollar, or 98.88 U.S. cents, gaining in the final hours of
trading as volumes dried up ahead of the Canadian Thanksgiving
long weekend.
 The closing level was up from Thursday's close of C$1.0185
to the U.S. dollar, or 98.18 U.S. cents.
 Higher prices for commodities such as oil, copper, and gold
-- all of which Canada exports -- also helped spur the
currency, bringing it in range of reaching parity with the U.S.
 For the week, the currency rose 0.8 percent, its
sixth-straight week of gains, helped by recovering commodity
prices, expectations of rising interest rates, and the U.S.
greenback's weakness.
 Spitz said the trend to a stronger currency should
continue, with C$1.0063 to the U.S. dollar looming as a key
technical level, meaning a breach could propel the Canadian
dollar up sharply.
 "Parity continues to be a target for most people that are
long Canada," he said.
 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.
 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.
 Canadian government bond prices were mostly higher after
the U.S. nonfarm payrolls report. [ID:nN08205203]
 The two-year bond CA2YT=RR ended 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 Cameron French, additional reporting by Ka Yan
Ng; editing by Peter Galloway)