Canadian dollar ends above parity after jobs data

Fri Feb 8, 2008 5:02pm EST
 
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 By Frank Pingue
 TORONTO, Feb 8 (Reuters) - The Canadian dollar shot higher
versus the U.S. dollar on Friday thanks to a stellar domestic
jobs report, but it later backed off its session high, and
suffered its first weekly loss in three weeks.
 Canadian bond prices ended higher across the curve as early
data related losses were considered overdone by some, while the
bigger U.S. Treasury market offered a positive bid.
 The Canadian dollar closed at US$1.0002, valuing a U.S.
dollar at 99.98 U.S. cents, up from 98.93 U.S. cents, which
values a U.S. dollar at C$1.0108, at Thursday's close.
 Figures that showed the economy added four times more jobs
than expected in January got the ball rolling for the Canadian
dollar, which reached a session high of US$1.0053, valuing a
U.S. dollar at 99.47 Canadian cents.
 Heading into the session, the Canadian dollar was down
about 1.3 percent on the week and looked set for more losses.
But the surprising jobs data helped it rally and check out of
the week down just 0.5 percent.
 "It came out of nowhere," said David Watt, senior currency
strategist at RBC Capital Markets. "It really looked like we
were just going to have a piddly month of job gains ... but the
Canadian economy is looking resilient."
 According to Statistics Canada, the economy added 46,400
positions, while the unemployment rate returned to October's
33-year low of 5.8 percent from December's 6.0 percent.
 But the Canadian dollar could not hang on to its gains as
traders started to consider that the slowdown in the United
States will eventually work its way into Canada.
 The Canadian dollar's upward potential is expected to be
minimal as the Canadian economy may start feeling fallout from
the United States during the second half of 2008.
 "People are beginning to question if the Canadian jobs
numbers just offset some of the downside risks that we've seen
or if it has changed the perception," Watt said. "I don't think
it's changed the perception."
 Other Canadian data that offered early support to the
Canadian dollar showed housing starts rose 20.6 percent in
January to a seasonally adjusted annualized rate of 222,700
units from 184,700 units in December.
 BONDS END HIGHER
 Canadian bond prices rebounded to finish higher as a rally
in the bigger U.S. Treasury market convinced many investors to
rethink an early selloff.
 The sharp data forced investors to question the speed at
which the Bank of Canada will cut interest rates in response to
the U.S. slowdown.
 "The initial reaction was perhaps a little too strong,"
said Carlos Leitao, senior economist at Laurentian Bank of
Canada in Montreal. "But Canada can't really deviate much from
the U.S. trends on the bond market so in the afternoon we moved
closer in line with what what was going on there."
 The two-year bond rose 1 Canadian cents to C$102.04 to
yield 3.073 percent. The 10-year bond increased 30 Canadian
cents to C$101.40 to yield 3.819 percent.
 The yield spread between the two- and 10-year bond was 74.6
basis points, down from 74.7 points at the previous close.
 The 30-year bond rose 60 Canadian cents to C$113.60 to
yield 4.189 percent. In the United States, the 30-year treasury
yielded 4.425 percent.
 The three-month when-issued T-bill yielded 3.28 percent,
unchanged from the previous close.