CANADA FX DEBT-C$ lower after domestic data; oil drops

Fri Jul 10, 2009 9:36am EDT
 
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 * C$ down at C$1.1658 to the U.S. dollar
 * Fewer Canadian jobs lost in June than expected
 * May trade deficit at record C$1.42 bln
 * Bond prices higher across curve
 (Adds details, trade report, quote)
 By Frank Pingue and Jennifer Kwan
 TORONTO, July 10 (Reuters) - The Canadian dollar was lower
versus the U.S. currency on Friday as early gains made after a
domestic jobs report beat expectations were handed back as a
closer look at details of the report revealed weakness.
 Domestic trade data also pressured the currency, with a
report showing plummeting energy and autos exports pushed
Canada into its largest trade deficit ever in May at C$1.42
billion ($1.2 billion), up from a deficit of C$389 million in
April. [ID:N10501985]
 "You have employment decline which was less than expected
and a trade deficit that was probably bigger than expected at a
time when commodity prices are a little bit under pressure,"
said Aron Gampel, deputy chief economist at Scotiabank.
 "What that adds up to is a little bit of weakness in the
Canadian dollar."
 Canada's currency rallied as high as C$1.1615 to the U.S.
dollar, or 86.10 U.S. cents, after data showed fewer Canadians
lost their jobs in June than expected. [ID:N10253705]
 But the domestic currency quickly relinquished all the
gains and turned lower versus its U.S. counterpart as the
report also revealed that the only strength came from part-time
employment and that recession still gripped the economy.
 "You got the people that react immediately to what the
headline is regardless of the details, but it didn't take long
to look into the details to realize that this was not a strong
report." said David Watt, senior currency strategist at RBC
Capital Markets. "If anything, it was a very weak report."
 By the 9:12 a.m. (1312 GMT), the Canadian unit was at
C$1.1658 to the U.S. dollar, or 85.78 U.S. cents, down from
C$1.1623 to the U.S. dollar, or 86.04 U.S. cents, at Thursday's
close.
 The unit could be stuck lower for the remainder of the
session as commodity prices, often key drivers of the Canadian
currency given the nature of Canada's exports, were lower.
 Oil prices fell below $60 a barrel and were poised for
their biggest weekly fall since January as traders focused
economic uncertainty. [ID:nSP476597] Gold fell given a stronger
greenback. [ID:nLA430812]
 "A lot will depend on oil prices, but I don't think that
the employment report is going to give any lift to the Canadian
dollar by the end of the day," said Watt.
 Barring a sharp turnaround, the Canadian dollar will close
lower for the fourth straight week.
 BONDS HIGHER
 Bond prices remained largely higher across the curve,
following the bigger U.S. Treasury bond market up given
investor relief that this week's $73 billion worth of bond
auctions in the United States were out of the way.
[ID:nLA451062]
 The two-year Canada bond was up 4 Canadian cents at
C$100.17 to yield 1.158 percent, while the 10-year bond rose 20
Canadian cents to C$103.90 to yield 3.284 percent.
 The 30-year bond was up 15 Canadian cents to C$119.25 to
yield 3.865 percent. In the United States, the 30-year Treasury
yielded 4.2451 percent.
 ($1=C$1.1658)
 (Editing by Jeffrey Hodgson)