CANADA FX DEBT-C$ weakens as Canada sheds jobs, U.S. employment jumps
(Adds strategist comment, Bank of Canada context; updates prices) * Canadian dollar settles at C$1.3040 or 76.69 U.S. cents * Bond prices mostly higher across the maturity curve By Alastair Sharp TORONTO, July 8 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday after data showed the domestic economy unexpectedly shed 700 jobs and U.S. employment growth surged in June. The currency hit is weakest level since June 28 shortly after the release of the data before trimming losses to settle at C$1.3040, or 76.69 U.S. cents, compared with Thursday's official Bank of Canada close of C$1.3003, or 76.91 U.S. cents. The Bank of Canada has to decide next week whether to hold its target rate steady at 0.5 percent, where it's been since last July and is widely expected to stay, or to act post-Brexit vote and a string of recent weak domestic data to stimulate the economy. "Even though they probably haven't got enough ammunition to trigger a rate cut, they should still be very cautious, not just on today's employment report but the really terrible set of indicators we had earlier this week," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. He was referring to a central bank survey released on Monday that showed business sentiment remained subdued in the second quarter, and especially a near record trade deficit reported on Wednesday. Canada lost 700 jobs when the market was expecting a 5,000 job increase, while the unemployment rate dipped as less people sought work, Statistics Canada said on Friday. While the Canadian jobs report was weaker than expected, the move in the currency pair likely had more to do with the increase in U.S. hiring, economists said. U.S. nonfarm payrolls rose by 287,000 jobs last month, the largest gain since last October, the U.S. Labor Department said. The loonie, as Canada's currency is colloquially known, was weaker against a string of other currencies too, outperforming only the Swiss franc among major peers. Canadian government bond prices were mostly higher across the maturity curve, though the two-year price slipped half a Canadian cent to yield 0.468 percent. The benchmark 10-year gained 20 Canadian cents to yield 0.958 percent. The Canada-U.S. two-year bond spread was 14.1 basis points, while the 10-year spread was -39.8 basis points. (Additional reporting by Allison Martell; Editing by W Simon and Sandra Maler)
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