CANADA FX DEBT-Jobs data tugs C$ away from parity; bonds firm

Fri Apr 9, 2010 4:23pm EDT
 
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 * Ends at C$1.0040 to the US$, or 99.60 U.S. cents
 * Up 0.4 percent for the week
 * Canada adds fewer jobs than expected in March
 * Bond prices slightly higher across the curve
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, April 9 (Reuters) - The Canadian dollar ended on a
weaker note on Friday, tumbling away from parity with the
greenback after data showed softer jobs growth in March than
expected.
 The Canadian currency fell as low as C$1.0084 to the U.S.
dollar, or 99.17 U.S. cents, as investors reacted to the jobs
data, which eased pressure on the Bank of Canada to raise
interest rates. Before release of the jobs data, it was trading
close to one-for-one with the U.S. dollar.
 Canada's economy added a net 17,900 jobs in March,
following gains of 20,900 in February and 43,000 in January.
The unemployment rate remained steady at 8.2 percent.
[ID:nN09253705]
 Expectations had been for an increase of 25,000 jobs and an
unemployment rate of 8.2 percent.
 "There was some talk on the Street that the job gains in
March would be significantly higher than the 25,000 expected by
the market. When it turned out we didn't get that level of job
growth in March it more or less sucked the air out of the
Canadian dollar," said Millan Mulraine, economics strategist at
TD Securities.
 "The Canadian dollar never fully recovered from that
drop."
 The currency CAD=D3 finished the session at C$1.0040 to
the U.S. dollar, or 99.60 U.S. cents, down from Thursday's
close at C$1.0028 to the U.S. dollar, or 99.72 U.S. cents. It
rose 0.4 percent on the week.
 "It's softer than expected, but not soft numbers," Matthew
Strauss, senior currency strategist at RBC Capital Markets,
said of the employment report.
 "As a result, it doesn't really change our outlook on the
Bank of Canada or interest rates going forward. We're still
looking for the tightening process to start in the summer of
this year, and most likely July."
 Strauss added there was an "obvious knee-jerk reaction"
after the soft job numbers, but he noted there was still an
increase and the data did not take away from the improving
trend in Canadian employment.
 The Bank of Canada has made a conditional pledge to hold
its key interest rate at a record low of 0.25 percent until the
end of June, provided inflation stays tame.
 "This still is very much in line with the Bank of Canada
raising rates beginning in July, which the market has fully
priced in," said Avery Shenfeld, chief economist at CIBC World
Markets.
 "It wasn't a barn-burner report. There were certainly some
who were looking for a stronger number ... but it doesn't
dramatically alter the fundamentals for the currency."
 Strauss said a firmer tone in investor risk appetite as
seen in North American equities helped the Canadian dollar claw
back from low levels. [.N] [MKTS/GLOB]
 BONDS FIRM
 Canadian bond prices rose after the jobs report in a
knee-jerk reaction, but quickly came off their highs, Strauss
said.
 As well, TD's Mulraine said prices also got support from
underlying concerns about Greece's debt woes.
 "Even though we've had the Greek situation on us for months
now, every day something happens that seems to cause some
movement in the market. Today we did have the downgrade of
Greek bonds by Fitch ... that certainly has engendered a bit of
a risk aversion trade," he said.
 The two-year government bond CA2YT=RR rose 6 Canadian
cents to C$99.38 to yield 1.835 percent, while the 10-year bond
CA10YT=RR climbed 23 Canadian cents to C$100.75 to yield
3.653 percent.
 Canadian government bonds outperformed U.S. issues, with
the Canadian 10-year yield 23.1 basis points below its U.S.
counterpart, compared with around 20 basis points the previous
session.
  (Additional reporting by Claire Sibonney; editing by Rob
Wilson)