CANADA FX DEBT-C$ weaker after U.S. jobs report keeps Fed on course

Fri Aug 7, 2015 4:34pm EDT
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(Adds trader comment, updates prices to close)
    * Canadian dollar at C$1.3133, or 76.14 U.S. cents
    * Yield curve flattens

    By Alastair Sharp
    TORONTO, Aug 7 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as employment reports
from both countries kept their divergent monetary policy paths
on track.
    The loonie, as Canada's currency is colloquially known, has
lost almost 10 percent of its value since May. The central bank
has cut rates twice this year as a plunge in the price of oil
batters the country's energy industry.
    While the plunge has thrown up signs that the Canadian
currency is ready to pause, external factors such as weak crude
prices may exert further pressure.
    The Canadian dollar ending the week trading at
C$1.3133 to the greenback, or 76.14 U.S. cents, weaker than
Thursday's close of C$1.3108, or 76.29 U.S. cents.
    "Technically it looks as though we're topping out at this
C$1.32 level," said David Bradley, director of foreign exchange
trading at Scotiabank. 
    "The likelihood of a Fed (interest rate) hike is still
there, and I think there's a likelihood that the Bank of Canada
could still cut rates," he said. "(Bank of Canada Governor
Stephen) Poloz is happy with a softer Canadian dollar."
    The Canadian economy added 6,600 jobs in July, above the
average forecast of economists, but the number of full-time jobs
    U.S. employment rose at a solid clip in July and wages
rebounded after unexpectedly stalling in the prior month, signs
of an improving economy that could open the door to a Federal
Reserve interest rate increase in September. 
    "Going into the report, it (the Canadian dollar) was quite a
bit stronger, and it's since lost all that ground that it had,"
said Doug Porter, chief economist at BMO Capital Markets.
    "I think some of that is just more reflective of a solid
U.S. report today that keeps the Fed on track."
    Scotia's Bradley said there was little precedent for the
currency at these levels, its weakest since 2004, but that he
expects it to test the mid-C$1.33s by the end of the month.
    Weakness beyond that would test a Fibonacci retracement
level from all-time high to all-time low at C$1.3467, he said.
    U.S. crude prices fell 1.9 percent to $43.80 a
barrel, while Brent crude lost 1.9 percent to $48.56.
    The yield curve for Canadian government bonds flattened,
with the price for the two-year down 1.5 Canadian
cents to yield 0.442 percent and the benchmark 10-year
 up 26 Canadian cents to yield 1.424 percent.

 (Additional reporting by Allison Martell; Editing by Jonathan