CANADA FX DEBT-C$ hits 2-week high on "stunning" jobs report
* C$ ends at 96.74 U.S. cents; up 2.8 pct for week
* Canada adds 93,200 jobs in June
* Bond prices fall on rising rate expectations (Updates to close, adds quote)
By Jennifer Kwan
TORONTO, July 9 (Reuters) - Canada's dollar soared and yields on its bond climbed on Friday on news the economy created six times more jobs than forecast in June, pressuring the Bank of Canada to raise interest rates again this month.
The Canadian dollar CAD=D4 jumped more than a penny to touch a session high of C$1.0296 to the U.S. dollar, or 97.13 U.S. cents, its strongest level since June 23.
Canadian employment surged by 93,200 in June, far exceeding market predictions of a 15,000 gain and contradicting other recent data suggesting the country's galloping economic recovery was slowing. [ID:nN09261751]
"Today's job report was actually quite stunning. It's not just the individual number it's the rate of growth that we've had for the last several months," said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
"This has sort of changed things for (Bank of Canada Governor Mark) Carney in the sense that there's no doubt about the strength of Canadian jobs growth, which is obviously a big fundamental of the Canadian economy."
The Canadian dollar finished at C$1.0337 to the U.S. dollar, or 96.74 U.S. cents, up from Thursday's finish at C$1.0440 to the U.S. dollar, or 95.79 U.S. cents. The currency gained 2.8 percent for the week, its biggest weekly gain in a month.
The employment report represented the final major data ahead of the July 20 Bank of Canada rate decision.
In a Reuters poll conducted following the jobs report all of Canada's primary securities dealers predicted that the Bank of Canada would raise interest rates by 25 basis points this month and again in September. But some forecast a pause later this year on uncertainty about the pace of global economic growth. [CA/POLL]
Analysts said given global economic uncertainty, Carney is likely to keep his options open when he speaks following the July 20 decision.
"He still has justification for not even going and he has justification for tightening so he really is in a catbird seat," said BMO's Askari.
"I guarantee you he is the envy of every other central bank governor in the G7 because the Canadian economy is outperforming just about everybody else."
Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, showed the market sees an 84 percent chance of a July rate hike, compared to about 61 percent on Thursday. BOCWATCH
Still, investors will keep a close eye on two key surveys conducted by the central bank that will be release on Monday.
"The last piece of the puzzle before the BoC decides will be Monday's Business Outlook and Senior Loan Officer surveys," said David Watt, senior fixed income and currency strategist at RBC Capital Markets.
With a near-term rate hike largely priced in, Canadian bond prices retreated. The two-year government bond CA2YT=RR fell 17 Canadian cents to yield 1.714 percent, while the 10-year bond CA10YT=RR sank 35 Canadian cents to yield 3.238 percent.
Canadian bonds underperformed U.S. Treasuries, with the Canadian 2-year government bond yield 108 basis points above its U.S. counterpart, up from about 101 in the previous session. (Editing by Jeffrey Hodgson)
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