September 4, 2009 / 8:43 PM / 11 years ago

CANADA FX DEBT-C$ follows upbeat jobs data to higher close

 * C$ hits one-week high of C$1.0824 per US$
 * Canadian economy adds 27,100 jobs in August
 * Bond prices end lower across curve; Canada outperforms
 By Frank Pingue
 TORONTO, Sept 4 (Reuters) - Canada's dollar rallied against
the greenback on Friday and touched its highest level in a week
as upbeat Canadian and U.S. jobs data helped spark demand for
riskier assets.
 The Canadian dollar was given an early boost after a report
showed the Canadian economy unexpectedly added 27,100 jobs in
August even though the unemployment rate rose to an 11-1/2 year
high of 8.7 percent. [ID:nN04153956]
 The currency's rally continued after data from the United
States, Canada's biggest trading partner, showed employers cut
fewer-than-expected jobs in August. [ID:nN03530870]
 The reports were enough to send the Canadian dollar as high
as C$1.0824 to the U.S. dollar, or 92.39 U.S. cents, shortly
after midday, which marked its highest level since Aug. 28.
 "Obviously the initial culprit is the very strong Canadian
jobs numbers that have lent a positive tone to Canada," said
Eric Lascelles, chief economics and rates strategist TD
Securities. "Canada was one of the stronger performers of the
day, but just about everybody is up versus the U.S. dollar."
 Activity during the second half of the session was quiet as
many traders left early ahead of the long weekend. Financial
markets in Canada and the U.S. will be closed Monday for Labor
 The Canadian dollar closed at C$1.0867 to the U.S. dollar,
or 92.02 U.S. cents, up from C$1.1033 to the U.S. dollar, or
90.64 U.S. cents, at Thursday's close. It ended the week with a
gain of 0.5 percent.
 The rise in the Canadian dollar versus the greenback came
alongside a number of the crosses, or overseas currencies. But
it still managed to outperform most of them after having not
participated in rallies earlier this week.
 "I look at Canada over the last week and it's actually been
a middle of the pack player," said Lascelles. "So I think there
has been some late-week scrambling to help keep the Canadian
currency abreast with its peers because there was a significant
lag earlier in the week."
 A key event next week is the Bank of Canada's monetary
policy announcement on Thursday, where the bank is expected to
stick to its conditional pledge to keep its benchmark interest
rate at the current near-zero level. [ID:TOR004942]
 Still, traders will keep a close eye on the statement that
accompanies the rate announcement for any clues into the bank's
thinking on the domestic economy and hints on when it could
move rates next.
 Canadian bond prices ended down across the curve as the mix
of upbeat data and a rally in North American equities combined
to sap demand for more secure government debt.
 The S&P/TSX composite index .GSPTSE ended up 0.88 percent
at 11,017.47, while the Dow Jones industrial average .DJI
rallied 1.03 percent to 9,441.27.
 After the jobs data another report showed purchasing by
Canadian businesses expanded in August at a faster pace than
had been expected, adding to evidence that the economy may have
started to rebound. [ID:nN04165636]
 "The economic data is the pretty consistent story there,"
said Lascelles. "But I've been shouting for all to hear that
North American bonds are extremely rich at current levels so I
think there is just and natural instinct to allow (yields) to
drift higher."
 The two-year bond CA2YT=RR dropped 6 Canadian cents to
C$99.45 to yield 1.283 percent, while the 10-year bond
CA10YT=RR shed 31 Canadian cents to C$103.06 to yield 3.377
 The 30-year bond CA30YT=RR slipped 40 Canadian cents to
C$118.60 to yield 3.896 percent.
 Canadian bonds outperformed their U.S. counterparts across
much of the curve. The Canadian 30-year bond yield was about
37.9 basis points below its U.S. counterpart, compared with
28.5 basis points on Thursday.
 (Editing by Jeffrey Hodgson)

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