February 5, 2016 / 9:40 PM / 4 years ago

CANADA FX DEBT-C$ pressured by jobs loss, lower oil prices

(Adds analyst comment, data on short positions; updates prices)
    * Canadian dollar at C$1.3908, or 71.90 U.S. cents
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Feb 5 (Reuters) - The Canadian dollar lost ground
against its U.S. counterpart on Friday after weak Canadian jobs
data underlined the economy's struggles to cope with an oil
shock, while oil prices fell and U.S. wage inflation renewed
bets on higher U.S. rates this year.
    The sharp move weaker in the Canadian dollar followed strong
appreciation earlier in the week, as the currency has broadly
won back value since slumping to a 12-year low in mid-January.
    Data showing Canada's economy shed jobs in January somewhat
overshadowed encouraging improvement in its trade deficit,
including strength in exports. 
    "A tremendous amount of bad news is priced into the Canadian
dollar," said Adam Button, a currency analyst at ForexLive in
Montreal. "Today's jobs report was a strike against the Canadian
economy, but it's only one strike."
    The Canadian dollar ended the session trading at
C$1.3908 to the greenback, or 71.90 U.S. cents, weaker than
Thursday's official close of C$1.3745, or 72.75 U.S. cents.
    It ended last week at C$1.4006, or 71.40 U.S. cents.
    The currency's strongest level of the session was C$1.3710,
while its weakest was C$1.3913. On Thursday, the currency
touched its strongest since Dec. 11 at C$1.3640.
    Speculators have trimmed bearish bets against the Canadian
dollar, a week after they hit their highest in five months. 
    Net short Canadian dollar positions decreased to 52,420
contracts in the week ended Feb. 2 from 66,819 in the prior
week, Commodity Futures Trading Commision data showed. 
    Meanwhile, the greenback got a boost after data showed a
pickup in U.S. wages in January, suggesting greater inflation
that could give the Federal Reserve more scope to raise U.S.
interest rates this year.
    Oil prices ended lower in choppy trading, snapping two weeks
of gains, as a frenzy of speculation about a possible deal
between top producers clashed with concerns about a growing
supply glut. 
    Canadian government bond prices rose across the maturity
curve, with the two-year price up 2.5 Canadian cents
to yield 0.374 percent and the benchmark 10-year 
adding 16 Canadian cents to yield 1.131 percent.
    Canada lost 5,700 jobs in January and the unemployment rate
edged up to a two-year high of 7.2 percent. Analysts polled by
Reuters had forecast a gain of 5,500 positions and for the
unemployment rate to stay at 7.1 percent. 
    The trade deficit narrowed to a smaller-than-expected C$585
million in December from a revised C$1.59 billion in November.

 (Additional reporting by Fergal Smith; Editing by Nick
Zieminski and James Dalgleish)
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