CANADA FX DEBT-Canada dollar retreats from parity on weak jobs

Fri Apr 9, 2010 8:15am EDT
 
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 * C$ slumps to C$1.0058 or 99.42 U.S. cents
 * Canada March jobs data lower than expected
 * Bond prices higher across the curve
 By Claire Sibonney
 TORONTO, April 9 (Reuters) - The Canadian dollar extended
its decline against its U.S. counterpart on Friday after a
weaker-than-expected reading of Canadian jobs quelled some
speculation that Canadian interest rates may soon rise.
 Canada's economy added a lower-than-expected 17,900 jobs in
March with part-time job gains offsetting full-time job losses.
The unemployment rate remained unchanged at 8.2 percent.
[ID:nN09253705]
 Expectations had been for an increase of 25,000 jobs and an
unemployment rate of 8.2 percent.
 At 7:52 a.m. (1152 GMT), the Canadian dollar CAD=D3 was
at C$1.0058 or 99.42 U.S. cents, down from Thursday's close at
C$1.0028 or 99.72 U.S. cents. Before the data was released, the
Canadian currency was above par at C$0.9996 or $1.0004.
 But economists insisted the data was still good news for
Canada's economy.
 "When you consider that employment is trending up and
providing fuel for consumer spending, it bodes well for the
economic outlook," said Sal Guatieri, senior economist at BMO
Capital Markets.
 "The Canadian dollar has backed off a little bit on the
report but I'm not sure its weakness will be sustained in the
face of generally positive economic numbers for Canada."
 Market watchers say the data is unlikely to change the view
that the Bank of Canada is set to raise interest rates sooner
rather than later.
 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 based on the absence of
stormy weather in Canada in March but it doesn't dramatically
alter the fundamentals for the currency."
 Offsetting the weaker than expected jobs numbers, oil rose
above $86 to near 18-month highs to support the
commodity-linked currency, as positive U.S. economic indicators
and rallying equities lifted expectations for sustained energy
demand growth in the world's number one energy-consuming
country. [O/R]
 Canadian bond prices rose after the report, moving in the
same direction as U.S. Treasuries, which found some support in
Europe. [US/]
 "The advantage for the bond market is that it doesn't
suggest that the Bank of Canada has to move ahead of July and
the market was starting to put some odds on a June hike that
this report does not provide any support for," added Shenfeld.
 The two-year government bond CA2YT=RR rose 10 Canadian
cents at C$99.42 to yield 1.814 percent, while the 10-year bond
CA10YT=RR jumped 13 Canadian cents to C$100.650 to yield
3.666 percent.
  (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)