November 5, 2010 / 2:46 PM / 10 years ago

CANADA FX DEBT-C$ rides U.S. jobs report to parity

 * C$ hits session high of $1.0004
 * U.S. nonfarm payrolls surge in October
 * Canada October job gains weaker than expected
 * Bonds weaker in reaction to job reports  (Recasts)
 By Claire Sibonney
 TORONTO, Nov 5 (Reuters) - The Canadian dollar hit parity with the greenback on Friday morning after data showed U.S. payrolls surged in October and investors found positive signs in a soft Canadian jobs report.
 The Canadian dollar CAD=D4 rose as high as 99.96 Canadian cents to the U.S. dollar, or $1.0004, after the U.S. data was released.
 “Everything that could possibly be positive for Canada is right now. We’ve got equities slightly up, we’ve got crude slightly up, we’ve got gold bouncing back,” said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
 He said, however, the Canadian dollar has benefited most from the battering the U.S. dollar has taken since the U.S. Federal Reserve pledged a second round of stimulative measures on Wednesday.
 The Canadian dollar came very close to reaching a one-for-one footing with the U.S. dollar earlier this week but was undermined by Ottawa’s decision to block BHP Billiton’s (BHP.AX) $39 billion takeover bid for Potash Corp POT.TO.
 “Canada is and will continue to outperform on the crosses for the near future as opposed to the underperformance earlier in the week, specifically with the Potash denial,” Askari said.
  At 10:17 a.m. (1417 GMT), the Canadian dollar CAD=D4 stood at C$1.0011 to the U.S. dollar, or 99.89 U.S. cents, up from Thursday’s close at C$1.0024 to the U.S. dollar, or 99.76 U.S. cents.
 Askari noted the next resistance level for the Canadian dollar is October’s high of 99.81 Canadian cents to the U.S. dollar, when the Canadian dollar was worth US$1.002.
 The currency pushed above parity last month for the first time since April, but lacked conviction, partly because the Bank of Canada’s October policy statement was more dovish than some had expected.
 The Canadian currency dropped briefly early on Friday morning after a report showed Canada’s economy added a mere 3,000 jobs in October, a fifth of what had been expected. But it quickly pared losses as details of the report were seen as being more favorable. Positive signals included a drop in the unemployment rate and more full-time and private-sector hiring. [ID:nSCL5ME673]
 “Even though the headline of the Canadian employment was weaker than expected, the underlying was fairly strong,” said Camilla Sutton, chief currency strategist at Scotia Capital.
 “The strong (U.S.) nonfarm just relieved some of the fears that the Canadian economy is going to be pulled down by a softening U.S. economy, so that’s been positive.”
 U.S. employment increased far more than expected last month as private companies hired workers at the fastest pace since April, a sign the economy is starting to tick up. [ID:nN04265378]
 Canadian bond prices were weaker following both sets of employment data as the optimistic signals for the economy erased some of the safe-haven appeal of government debt.
 The two-year bond CA2YT=RR was off 9 Canadian cents to yield 1.456 percent, while the 10-year bond CA10YT=RR slipped 5 Canadian cents to yield 2.821 percent.  (Additional reporting by Ka Yan Ng; editing by Peter Galloway)                                                      

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