August 10, 2018 / 1:38 PM / a month ago

CANADA FX DEBT-C$ hits 2-week low as geopolitics offsets jobs gain

    * Canadian dollar at C$1.3084, or 76.43 U.S. cents
    * Loonie touches its weakest since July 25 at C$1.3122
    * Bond prices mixed across a flatter yield curve
    * Canada-U.S. 2-year spread hits narrowest since May 31

    By Fergal Smith
    TORONTO, Aug 10 (Reuters) - The Canadian dollar weakened to
a more-than two-week low against its U.S. counterpart on Friday
as geopolitical risk rattled global financial markets,
offsetting stronger-than-expected domestic jobs data.
    At 9:22 a.m. EDT (1322 GMT), the Canadian dollar         
was trading 0.3 percent lower at C$1.3084 to the greenback, or
76.43 U.S. cents. The currency's strongest level of the session
was C$1.3033, while it touched its weakest since July 25 at
C$1.3122.
    Canada unexpectedly added 54,100 jobs in July and the
unemployment rate dipped to equal a record low 5.8 percent.
            
    "Canadian labour markets continue to generate jobs at a
pretty good pace that will support growth in the economy," said
Paul Ferley, assistant chief economist at Royal Bank of Canada.
    But analysts said the data were weaker than they appeared,
due to a drop in full-time jobs and slower wage growth. They
played down talk of another interest rate hike from the Bank of
Canada as soon as next month.
    The central bank tightened in July for the fourth time in a
year. Its benchmark interest rate is at 1.50 percent.
    Chances of a rate hike in September were little changed at
about 25 percent after the data, the overnight index swaps
market showed.               
    "The loonie failed to gain momentum from that economic
indicator release given the current geopolitical climate."
Alfonso Esparza, a senior currency analyst at OANDA, said in a
research note.
    A plunging Turkish lira rattled global markets due to
concerns over the country's economy and a deepening rift with
the United States.             
    Canada exports many commodities and runs a current account
deficit so its economy could be hurt if the flow of trade or
capital slows.    
    U.S. crude oil futures        were up 0.60 percent at $67.21
a barrel, cutting their decline for the week. Oil is one of
Canada's major exports.    
    Canadian government bond prices were mixed across the yield
curve, with the two-year            down 1 Canadian cent to
yield 2.121 percent and the 10-year             rising 2
Canadian cents to yield 2.331 percent.
    The gap between Canada's 2-year yield and its U.S.
counterpart narrowed by 3 basis points to a spread of 50.8 basis
points in favor of the U.S. bond, its narrowest since May 31.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
  
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