CANADA FX DEBT-C$ recovers from earlier risk aversion; focus turns to jobs
* Canadian dollar at C$1.0647 or 93.92 U.S. cents * Bond yields down but cut initial declines (Recasts with change in direction, adds details, quotes, updates prices) By Leah Schnurr TORONTO, July 10 (Reuters) - The Canadian dollar firmed against the greenback on Thursday as investors positioned ahead of the key domestic jobs report at the end of the week, helping the currency recover from earlier weakness as risk aversion hit markets broadly. Fears over financial troubles at the family-owned holding companies behind Portugal's largest listed bank rattled investors overnight as it revived the specter of the euro zone debt crisis. The concerns hit markets globally and took the loonie lower in early trading, but the currency shrugged off its losses by the afternoon. "Those types of headlines are typically really loonie negative," said Rahim Madhavji, president at Knightsbridge Foreign Exchange in Toronto. "It's surprising to see the amount of resistance the loonie has had to those negative catalysts, which historically would have been just another reason to sell off the loonie and move toward the U.S dollar." The Canadian dollar ended the North American session at C$1.0647 to the greenback, or 93.92 U.S. cents, stronger than Wednesday's close of C$1.0660, or 93.81 U.S. cents. After hitting a six-month high last week, the Canadian dollar's recent rally has ground to a halt with the loonie mainly trading sideways. "It seems like a lot of speculators are starting to be bullish on the Canadian dollar, we've seen that over the last couple months with just the position shifting. So the loonie obviously has some momentum," said Madhavji. That sentiment will be tested on Friday with the Canadian jobs market report, which is forecast to show the economy added 20,000 jobs in June, slowing slightly from the month before. The jobs report will be a prelude to next week's monetary policy statement from the Bank of Canada, which investors are also positioning for. The central bank has repeatedly flagged its concern about the low inflation environment, but after some recent stronger-than-expected inflation readings there is speculation over whether the bank will be forced to change its message. The Bank of Canada will release its updated economic forecasts at the same time. The central bank's business outlook survey, which was released earlier this week and showed that inflation expectations remain well-anchored, could serve as a template for its statement next week, said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto. "When you take the business outlook survey and the anchored inflation expectations with the still-slow growth in Canada, that gives them ample room for now to continue to sound cautious at next week's meeting," he said. After touching a more than one-year low, the yield on the Canadian government benchmark 10-year bond pared losses to yield 2.239 percent, up 8 cents in price. The two-year was up half a Canadian cent to yield 1.121 percent. (Editing by Diane Craft)
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