CANADA FX DEBT-C$ weakens on commodities, global worries

Fri Jun 10, 2011 11:31am EDT
 
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   * C$ at C$0.9771 to the U.S. dollar, or $1.0234
 * Global economic worries offset healthy jobs data
 * Bonds higher on growing risk-aversion
 (Updates with details, comment)
 By Solarina Ho
 TORONTO, June 10 (Reuters) - The Canadian dollar weakened
against a firmer greenback on Friday, paring earlier gains from
healthy jobs data, as commodity prices came under pressure and
concerns about the global economy weighed.
 U.S. crude fell more than $3, retreating below $100 a
barrel following news that Saudi Arabia was offering more oil
to Asian refiners, easing supply concerns following an
inconclusive OPEC meeting on Wednesday.
 Adding to the pressure was a stronger U.S. dollar and
weaker equity prices. [O/R] [MKTS/GLOB]
 The U.S. dollar had also strengthened against the euro as
ongoing uncertainty about Greece's debt crisis weighed. [FRX/]
 "The new thing is the spreading concern about global
growth. While we had the strong Canadian data, which gave the
Canadian dollar a lift earlier, these other factors are
certainly coming into play," said David Watt, RBC Capital
Markets' senior currency strategist.
 Watt also noted that some of the commodity prices have
slipped below their 200-day moving averages.
 "They seem to be more than offseting signs that the
domestic side of the Canadian economy is doing relatively well
and likely needs higher interest rates, but the (central)
bank's not going to move so long as the global conditions
remain tenuous."
 At 10:36 a.m. (1436 GMT), the currency CAD=D4 stood at
C$0.9771 to the U.S. dollar, or $1.0234, down from Thursday's
close at C$0.9731 to the U.S. dollar, or $1.0276.
 Earlier in the session, the currency had risen as high as
C$0.9711 to the U.S. dollar, or $1.0298 -- its firmest level
since June 1 -- following a better than expected domestic
employment report.
 The unemployment rate fell to 7.4 percent in May from 7.6
percent as 22,300 jobs were added, marked by a solid shift
toward full-time, private-sector employment, according to
Statistics Canada. [ID:nN10172943]
 That was slightly better than the 20,000 jobs expected by
analysts, who also predicted the unemployment rate would remain
at 7.6 percent.
 "There were certainly fears out there that after such a big
job gain in April, we might even see a flat or declining figure
for May," said Avery Shenfeld, chief economist at CIBC World
Markets.
 "The fact that we really held onto to the gains in the
prior month in paid employment and gained some self-employment
jobs was a plus."
 Overnight index swaps, which trade based on expectations
for the Bank of Canada's key policy rate, showed that just
after the data investors priced in slightly higher odds of
tightening at policy announcements in September, October and
December. [BOCWATCH]
 Expectations of tightening later weakened as commodity and
stock prices tumbled more than 1 percent.
 The bank is widely expected to raise interest rates in
September, according to a May 31 poll of primary dealers.
[CA/POLL]
 Canadian bond prices, which were mixed earlier, were higher
across the curve as worries about the global economic recovery
sent investors toward lower-risk government debt.
 The two-year bond CA2YT=RR was up half a Canadian cent to
yield 1.437 percent, while the 10-year bond CA10YT=RR added
28 Canadian cents to yield 3.004 percent.
 (Editing by Rob Wilson)