CANADA FX DEBT-C$ ends flat as profit-taking cuts gains

Fri Oct 7, 2011 4:30pm EDT
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 * Closes at C$1.0383 to U.S. dollar, or 96.31 U.S. cents
 * Profit-taking ends relief rally
 * Bond prices lower across the curve
 (Adds details, analyst's comment)
 By Andrea Hopkins
 TORONTO, Oct 7 (Reuters) - The Canadian dollar ended little
changed against its U.S. counterpart on Friday, capping a
volatile week that saw it hit 13-month lows before regaining
some strength as the economic backdrop improved.
 North American stock markets and commodity-linked
currencies had a see-saw day after stronger-than-expected U.S.
jobs data suggested Canada's largest trading partner had likely
skirted recession despite the summer slowdown. [MKTS/GLOB]
 While stronger than expected employment data in both Canada
and the United States buoyed risk appetite in early trade,
sending the Canadian dollar higher alongside stocks, the
currency later softened as investors went into a long weekend
in Canada with a cautious eye on the persisting debt woes in
 "Everything was looking quite rosy early on, and then
evidently some profit-taking came in late in the day and no one
wanted to go home with risk assets on the books," said Blake
Jespersen, director of foreign exchange sales at BMO Capital
 "What that says to us is markets are still not believing in
this rally, and as such decided to take profit before the long
 The Canadian dollar CAD=D3 ended the North American
session at C$1.0383 to the U.S. dollar, or 96.31 U.S. cents,
barely changed from Thursday's North American session close at
C$1.0378 to the U.S. dollar, or 96.36 U.S. cents.
 It was down about 1.2 percent on the week, but well off the
13-month low of C$1.0658 it hit on Tuesday.
 Still, analysts said the Canadian dollar is likely to
weaken again in the days ahead as Europe's sovereign debt
crisis persists and concern about the impact of the crisis on
the global economy weighs on commodities and risk appetite.
 "We're probably going to get back to the recent lows, the
C$1.0650 level. I think Europe is going to continue to drag on
the markets and any indecision or waffling on this new plan to
bail out the banks is really going to cause a lot of market
gyration," Jespersen said.
 Data showed U.S. employment grew by 103,000 in September,
and job gains for previous months were revised higher, easing
fears of a double-dip U.S. recession. [ID:nN1E7960AR]
 In Canada, a more than expected 60,900 new jobs helped
slice Canada's unemployment rate to 7.1 percent in September
from 7.3 percent in August, Statistics Canada said on Friday.
 Overnight index swaps, which trade based on expectations
for the Bank of Canada's key policy rate, showed that traders
cut their bets on a rate cut this year or next. Higher interest
rates typically help support currencies by attracting capital
 A Reuters poll showed Canada's primary dealers now expect
the Bank of Canada to raise interest rates in September 2012,
signaling a gloomier outlook as concerns over stalled global
economic momentum persist.
 The median forecast in a Reuters poll on Friday was for an
interest rate hike in September, compared with expectations of
a July tightening in a similar poll on Sept. 7.
 "There are increasing pressures in financial markets
related to Europe, so the external risks that the bank has
talked about are, if anything, intensifying," said Paul Ferley,
assistant chief economist at RBC Capital Markets.
 "With those external risks increasing, there is more reason
for the Bank to remain on hold."
 Bond prices were lower across the board. The yield on the
two-year Canadian government bond CA2YT=RR, which is
especially sensitive to Bank of Canada interest rate moves,
fell 6 Canadian cents to yield 0.968 percent. The 10-year bond
CA10YT=RR lost 15 Canadian cents to yield 2.240 percent.
 (Editing by Jeffrey Hodgson and Peter Galloway)