February 9, 2018 / 3:20 PM / 2 years ago

CANADA FX DEBT-C$ recoups losses as Wall Street gains offset jobs plunge

    * Canadian dollar at C$1.2596, or 79.39 U.S. cents
    * Loonie touches its weakest since Dec. 27 at C$1.2690
    * Bond prices higher across the yield curve
    * Canada-U.S. 10-year spread widens by 3.5 basis points

    By Fergal Smith
    TORONTO, Feb 9 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Friday, rebounding from
an earlier six-week low, as gains for U.S. stocks offset the
biggest decline in domestic jobs in nine years.    
    The decrease of 88,000 Canadian jobs was unexpected, against
economists' forecasts for a gain of 10,000, and made for the
biggest decline since January 2009.             
    Still, all the job losses were part-time, as full-time jobs
rose 49,000. The economy added jobs last year at the fastest
pace since 2002.
    "It's certainly another reason for the Bank of Canada to
bide its time and probably wait until July before raising
interest rates again," said Sal Guatieri, senior economist at
BMO Capital Markets.
    "There's a lot of concerns about trade protectionism ... and
the impact of new mortgage rules on our housing market."
    Chances of a rate hike in April slipped to less than 50
percent from 58 percent before the jobs report, data from the
overnight index swaps market showed.           
    The Bank of Canada last month raised its benchmark interest
rate to 1.25 percent, its third hike since July.
    U.S. stocks opened sharply higher as technology and
financial stocks rose, but the S&P 500 and Dow Jones Industrial
Average remained on course for their biggest weekly losses in at
least six years.             
    Commodity-linked currencies, such as the Canadian dollar
tend to underperform when stocks fall. The loonie has retreated
2.6 percent since Wall Street began to head sharply lower a week
    At 9:58 a.m. EST (1458 GMT), the Canadian dollar         
was trading 0.1 percent higher at C$1.2596 to the greenback, or
79.39 U.S. cents.
    The currency's strongest level of the session was C$1.2561,
while it touched its weakest since Dec. 27 at C$1.2690.
    The price of oil, one of Canada's major exports, fell for a
sixth day and was on track for their biggest weekly losses in 10
months, as record-high U.S. crude output added to concerns about
a sharp rise in global supplies.             
    U.S. crude        prices were down 1.1 percent at $60.49 a
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 6.5 Canadian cents to
yield 1.814 percent and the 10-year             rising 21
Canadian cents to yield 2.348 percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 3.5 basis points to a spread of -51.1
basis points, its widest since Dec. 19.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
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