January 5, 2018 / 2:43 PM / in 3 years

CANADA FX DEBT-C$ jumps to 3-month high as jobs data ups rate hike bets

    * Canadian dollar at C$1.2379, or 80.78 U.S. cents
    * Loonie touches its strongest since Sept. 27 at C$1.2355
    * Bond prices lower across the yield curve
    * Canada-U.S. 2-year spread narrows by 7.9 basis points

    By Fergal Smith
    TORONTO, Jan 5 (Reuters) - The Canadian dollar strengthened
to a three-month high against its U.S. counterpart on Friday
after stronger-than-expected domestic jobs data boosted
expectations for a Bank of Canada interest rate hike as soon as
this month.
    The Canadian economy added almost 80,000 jobs for the second
month in a row in December on a surge in part-time employment,
and the jobless rate dipped to a 41-year low of 5.7 percent,
Statistics Canada said. Analysts had expected a modest gain of
1,000 jobs.             
    "It certainly fits with a central bank that is likely to
lift rates this quarter," said Andrew Kelvin, senior rates
strategist at TD Securities. 
    Chances of a hike at the next rate decision on Jan. 17 rose
to more than 60 percent from 35 percent before the data, the
overnight index swaps market indicated.           
    In separate data, Canada's trade deficit in November widened
to C$2.54 billion as both exports and imports benefited from
increased activity in the automotive industry, Statistics Canada
    At 9:17 a.m. EST (1417 GMT), the Canadian dollar         
was trading at C$1.2379 to the greenback, or 80.78 U.S. cents,
up 0.9 percent.
    The currency touched its strongest since Sept. 27 at
    Still, analysts in a Reuters poll say that an uncertain
outlook for the North American Free Trade agreement could weigh
on the loonie over the coming months.             
    The U.S. dollar        pared gains against a basket of major
currencies on Friday after data showed the U.S. economy created
fewer jobs than expected in December.             
    The price of oil, one of Canada's major exports, fell as
soaring U.S. production undermined a 10 percent rally from
December lows.             
    U.S. crude        prices were down 0.84 percent at $61.49 a
    Canadian government bond prices were lower across the yield 
curve, with the two-year            down 14 Canadian cents to
yield 1.783 percent, its highest since June 2011, and the
10-year             falling 63 Canadian cents to yield 2.161
    The gap between Canada's 2-year yield and its U.S.
counterpart narrowed by 7.9 basis points to a spread of -17.4
basis points, its narrowest since Oct. 30.

 (Reporting by Fergal Smith; Editing by Andrew Hay)
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