CANADA FX DEBT-C$ flat vs greenback; hits new high vs Aussie

* C$ at $1.0346 versus US$, or 96.66 U.S. cents
    * U.S. private sector job creation lower than expected in
    * Prospect of Fed slowing stimulus tied to labor market
    * Flows slow ahead of Friday's North American jobs reports

    By Alastair Sharp
    TORONTO, June 5 (Reuters) - The Canadian dollar ended flat
against its U.S. counterpart on Wednesday as
weaker-than-expected U.S. private sector hiring restrained the
greenback's recent strength and complicated the prospect of the
Federal Reserve scaling back its monetary stimulus.
    The loonie, as Canada's currency is colloquially known, hit
a two-year high against the sinking Aussie dollar, a
fellow commodity-linked currency, after the Australian central
bank hinted of more easing as quarterly GDP data fell short of
    Traders said even that pair seems to be moving in relation
to developments in the United States, the world's largest
economy and Canada's main trading partner, as investors bet that
the U.S. economy will outperform and its central bank will
reduce stimulus.
    Slower growth in China, a major market for Australian
resources, has also helped the loonie outpace the Aussie.
    "Those two factors together have created a nice scenario for
the Canadian against the Aussie," said Blake Jespersen, a
managing director of foreign exchange sales at BMO Capital
    He said that for the U.S./Canada currency pair, trading has
been muted and would likely remain so until each country
releases comprehensive employment data on Friday.
    "It seems like everybody's waiting for a few of the
announcements coming up - non-farm (U.S. payrolls) and Canadian
employment are obviously the big headline numbers coming out in
a couple of days," he said.
    The moderate pace of hiring seen in May's U.S. ADP report of
135,000 new private sector jobs, released on Wednesday, suggests
some weakness in the job market and may not be enough to
persuade the Fed to soon pare back its monthly purchases of $85
billion of bonds.
     The Fed's bond buying aims to keep U.S. interest rates low,
thus making the dollar less alluring for investors seeking
higher returns on deposits elsewhere.
    The Canadian currency weakened considerably last month as 
robust U.S. economic data bolstered the view that the Fed would
rein in its bond buying in the coming months. 
    The Canadian dollar ended the session trading at
C$1.0346 to the greenback, or 96.66 U.S. cents, compared with
C$1.0344, or 96.67 U.S. cents, at Tuesday's North American
    "Markets are all about U.S. dollar direction at the moment.
Even dollar/yen is more dollar than it is yen," said Adam Cole,
global head of currency strategy at Royal Bank of Canada. "When
that's the case, the Canadian dollar tends to be relatively
    Jobs reports for both the United States and Canada are due
on Friday, with the U.S. print more closely watched given the
Fed has explicitly linked policy direction to the health of the
jobs market.
    After acting in recent months as a safe haven amid global
economic uncertainty, the greenback is now strengthening on
stronger data and falling back on weaker numbers.
    "Now that you've got some movement in expectation of Fed
policy expectations, it's more like a conventional world where
good news is good news rather than good news is bad news," RBC's
Cole said.
    A series of Reuters polls released on Wednesday showed that
the greenback is seen extending its gains against a string of
major currencies including the euro, pound sterling and yen,
while the Canadian dollar is expected to hold steady.
    Canadian government debt prices were higher across the
curve, with the two-year bond up 4 Canadian cents to
yield 1.047 percent, while the benchmark 10-year bond
 rose 39 Canadian cents to yield 2.040 percent.