March 13, 2009 / 2:14 PM / 8 years ago

CANADA FX DEBT-C$ rebounds after trade data, bonds weak

4 Min Read

* C$ rebounds from session low as appetite for risk grows

* Bonds flat to lower as stocks post more gains

* Canada sheds 82,600 jobs in Feb, jobless rate rises

* Canada trade deficit at C$993 mln is biggest on record (Updates to midmorning)

By Ka Yan Ng

TORONTO, March 13 (Reuters) - The Canadian dollar shot higher against the U.S. currency on Friday morning with growth in risk appetite, fueled by optimism over stock market rises, outgunning further evidence of a deteriorating economy.

At 9:45 a.m. (1445 GMT), the currency was at C$1.2696 to the U.S. dollar, or 78.77 U.S. cents, up from C$1.2791 to the U.S. dollar, or 78.18 U.S. cents, at Thursday's close.

That was a rebound from the session low of C$1.2844 to the U.S. dollar, or 77.86 U.S. cents, which was hit after Canadian employment data for February came in worse than expected.

The currency rose as high as C$1.2678 to the U.S. dollar, or 78.88 U.S. cents, on hopes that North American stock markets would build on this week's gains. World stocks seemed on track on Friday morning for one of their largest weekly gains in 20 years. [ID:nLD664043]

The Canadian dollar rose despite some bearish economic numbers released on Friday. Canada posted a record trade deficit of C$993 million in January, slightly ahead of expectations for a C$1 billion trade shortfall as shrinking U.S. demand for cars led to a dramatic slide in exports. [ID:nN13254064]

Also, the country shed 82,600 jobs last month, compared with forecasts for a decline of 52,500. The unemployment rate shot up to its highest level since 2003. [ID:nN13253705]

"Right now, risk appetites are fairly healthy and people are buying second-tier currencies and stocks. So the Canadian dollar is benefiting from the rebound in risk appetite." said Sal Guatieri, senior economist at BMO Capital Markets.

Friday's data added to an already pessimistic view of the economy in the first quarter. Finance Minister Jim Flaherty, in Britain for a Group of 20 finance ministers meeting, told a Toronto radio station that Canada will continue to see job losses for several months to come and will experience a difficult 2009. [ID:nN13515816]

"All in all not a very encouraging report," said George Davis, chief technical strategist at RBC Capital Markets, of the jobs report.

"At first Canada was able to avoid some of the initial fallout resulting from the global economic slowdown but the evidence that has come in data wise over the last three months or so is now starting to indicate we're playing a little bit of catch up to those weakening trends that we've seen in other countries," he added.

Bonds Flat to Lower

Canadian bond prices were flat to lower on Friday after the data and as stock markets ticked higher.

The appeal of the safe haven government debt is often curbed when riskier assets, such as stocks, are favored.

The two-year bond was unchanged at C$103.00 to yield 0.976 percent. The 10-year bond slipped 14 Canadian cents to C$107.16 to yield 2.932 percent.

The 30-year bond lost 40 Canadian cents to C$123.60 to yield 3.652 percent. The U.S. 30-year bond yielded 3.654 percent. (Additional reporting by Jennifer Kwan; Editing by Peter Galloway)

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