CANADA FX DEBT-C$ boost from strong Canadian jobs data, weak US numbers
* C$ firms to C$1.0409 vs US$, or 96.07 U.S. cents * Bond prices rise across maturity curve By Leah Schnurr TORONTO, Sept 6 (Reuters) - The Canadian dollar rallied on Friday, touching its firmest level in about two and a half weeks after employment figures for last month were unexpectedly strong in Canada and weaker than forecast in the United States. The Canadian economy created 59,200 jobs last month, nearly triple the 20,000 jobs economists had predicted. Most of the rebound was in part-time work, however, and followed a 39,400 loss in July. The unemployment rate nudged lower to 7.1 percent from 7.2 percent. The data saw the loonie strengthen to as much as C$1.0381, or 96.33 U.S. cents, and ended the session at C$1.0409 versus the U.S. dollar, or 96.07 U.S. cents, firmer than Thursday's close at C$1.0506, or 95.18 U.S. cents. "The headline is outstandingly strong and once again it reinforces the volatility we've been getting in the Canadian job numbers," said Craig Alexander, chief economist at Toronto-Dominion Bank. "It's averaging around 12,000 a month, which is a lackluster pace of employment growth and is consistent with an economy that is growing at a modest pace." At the same time, in the United States, 169,000 jobs were created, short of economists' expectations of 180,000 new jobs. The miss, along with downward revisions to previous months, sowed some uncertainty over when the Federal Reserve will start to pull back its economic stimulus efforts. Many investors expect the Fed will announce a reduction in the pace of its $85 billion a month in bond purchases when the central bank meets in mid-September. Friday's jobs report muddied the waters and helped take the greenback lower against a basket of currencies. Still, economists at a majority of U.S. primary dealers expect the Fed to announce later this month it will cut the size of its asset purchases. Economists did scale back the predicted size of the reduction. "The market by and large continues to see that tapering begins in September," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "The U.S. data was not negative, it was positive, it just wasn't as positive as one would have liked should they have been in the camp that says there is tapering (coming)." The Canadian jobs data did not change expectations the Bank of Canada will keep interest rates on hold at its next policy meeting. A Reuters poll last week showed economists were forecasting the next interest rate hike would take place during the fourth quarter of 2014. "Bottom line, the report is unlikely to alter Bank of Canada policy near term, leaving the Bank of Canada on the sidelines," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "The issue they're dealing with right now is getting a sense after the modest gain in GDP growth in the second quarter of how much of a rebound we're likely to get in Q3." Prices for Canadian government debt rose with the two-year bond up 3 Canadian cents to yield 1.290 percent and the benchmark 10-year bond climbing 31 Canadian cents to yield 2.771 percent.
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