* C$ closes at 99.67 U.S. cents
* Hits session low of 99.20 U.S. cents
* Both U.S., Canadian reports below forecasts
* Bank of Canada seen on hold well into 2011
(Updates to close, adds details, commentary)
TORONTO, Dec 3 (Reuters) - The Canadian dollar closed on a
flat note on Friday after initially sagging on disappointing
U.S. and domestic job data that undermined hopes of stronger
economic growth in coming months.
U.S. nonfarm payrolls rose far less than expected in
November -- up 39,000 versus forecasts of 140,000 -- and the
jobless rate jumped to a seven-month high of 9.8 percent,
dampening hopes for a self-sustaining economic recovery in
Canada's biggest trading partner. [ID:nN02238002]
In the aftermath of the weak U.S. data, the Canadian
dropped as low as C$1.0081 against the U.S.
dollar, or 99.20 U.S. cents.
The currency was already pulling back after Canadian
employment data showed a mixed performance in November with
tepid job gains of 15,200 versus expectations of 18,000. The
unemployment rate fell to 7.6 percent from 7.9 percent, but
that was largely due to young people dropping out of the job
"A weak Canadian jobs report and a weak U.S. jobs report is
not painting the rosiest of pictures for the Canadian
fundamental outlook," said Camilla Sutton, chief currency
strategist at Scotia Capital.
The Canadian dollar
regained ground after its
initial retreat and closed the North American session at
C$1.0033 to the U.S. dollar, or 99.67 U.S. cents, little
changed from Thursday's close at C$1.0039 to the U.S. dollar,
or 99.61 U.S. cents. For the week, it was up 1.7 percent.
Overnight, the Canadian dollar was only two basis points
shy of parity at C$1.0002, or 99.98 U.S. cents.
Sutton said speculation of large currency flows being
generated by the C$3.3 billion deal by U.S.-based Walter Energy
to buy Canada's Western Coal was a
factor behind the move toward parity and may help explain the
Canadian dollar's standout performance on Thursday when it
surged to a three-week high. [ID:nLDE6B20EU]
Looking ahead, next week's focus will be on the Bank of
Canada's interest rate announcement on Tuesday. But with the
jobs data doing little to change expectations it will almost
certainly stay on hold at 1 percent.
"The Bank of Canada would care deeply about both figures
and at this point neither argues shriekingly for a hike in the
near term," said Eric Lascelles, chief Canadian macro
strategist at TD Securities.
"I think we can sit comfortably and imagine that next week
is a pause and for that matter that early 2011 probably brings
more of the same."
On Sunday, the Federal Reserve will also be in the
spotlight, as Chairman Ben Bernanke appears on the U.S. TV news
program "60 Minutes." [ID:nN02276467]
Scotia's Sutton said comments by Bernanke to defend the
Fed's controversial $600 billion U.S. Treasury bill purchase
could spur some U.S. dollar weakness.
She noted that near term support for the U.S. dollar was a
recent low of C$0.9980 and the year trough from April at
Canadian government bonds erased earlier losses, up
modestly alongside Treasuries on an unwind of short positions
after the weak U.S. jobs report.[US/]
The two-year government of Canada bond
was up 8
Canadian cents to yield 1.637 percent, while the 10-year bond
gained 4 Canadian cents to yield 3.196 percent.
(Editing by Rob Wilson)