March 8, 2019 / 9:39 PM / a year ago

CANADA FX DEBT-C$ rallies as jobs surge crimps bets for BoC rate cut

 (Adds investor quote and details throughout, updates prices)
    * Canadian dollar rises 0.4 percent against greenback
    * Domestic jobs rise 55,900 in February
    * Price of U.S. oil falls 1 percent
    * Canadian bond prices trade mixed across a flatter yield

    By Fergal Smith
    TORONTO, March 8 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Friday, as bets for
an interest rate cut by the Bank of Canada this year were
slashed after domestic data showed a spike in jobs that
surprised investors.
    Employers added 55,900 jobs in February, which was the third
month of outsized gains in the last four and exceeded the 20,000
jobs created in the United States for the same month. Analysts
had forecast February job numbers to be flat in Canada.
    "It was a great report card for the Canadian jobs market and
it flies in the face of some of the other statistics that we've
been seeing lately out of Canada," said Scott Smith, managing
partner at Viewpoint Investment Partners. 
    Data one week ago showed that Canada's economy barely
expanded in the fourth quarter.             
    Chances of an interest rate cut by December, which had
climbed this week on a more dovish tone from the Bank of Canada,
fell to less than 20 percent from about 40 percent before the
jobs data, the overnight index swaps market indicated.
    "I think if you look at this big picture it is an argument
for the Bank of Canada to remain on the sidelines in the near
term, rather than one for them to consider eases," said Andrew
Kelvin, senior rates strategist at TD Securities.
    The Bank of Canada's benchmark interest rate is at 1.75
    At 4:04 p.m. (2104 GMT), the Canadian dollar          was
trading 0.4 percent higher at 1.3405 to the greenback, or 74.60
U.S. cents. The currency, which touched its weakest in more than
two months at 1.3467 on Thursday, traded in a range of 1.3391 to
    For the week, the loonie fell 0.8 percent.
    Gains for the loonie on Friday came despite separate data
showing that Canadian housing starts tumbled about 16 percent in
    Also, the price of oil, one of Canada's major exports, was
pressured by signs of a slowing global economy. U.S. crude oil
futures        settled 1 percent lower at $56.07 a barrel.
    Speculators have raised their bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of March 5, net short
positions had increased to 40,444 contracts from 39,177 in the
prior week.
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            price down 5 Canadian
cents to yield 1.651 percent.

 (Reporting by Fergal Smith
Editing by Susan Thomas and Tom Brown)
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