November 5, 2010 / 8:52 PM / 10 years ago

CANADA FX DEBT-C$ hits greenback parity on U.S. jobs data

 * C$ hits high of $1.0004, closes at 99.96 U.S. cents
 * U.S. payrolls surge, Canada jobs report softer
 * Bonds weaker in reaction to employment data  (Updates to close, adds comments)
 By Claire Sibonney
 TORONTO, Nov 5 (Reuters) - The Canadian dollar rose to parity with the greenback on Friday after figures showing a surge in U.S. hiring lifted sentiment and the market found some solid details in a soft Canadian jobs report.
 The currency CAD=D4 touched as high as 99.92 Canadian cents to the U.S. dollar, or $1.0008, after the strong U.S. jobs data, which added to the Canadian-dollar momentum generated by the U.S. Federal Reserve’s pledge on Wednesday to pump billions more dollars into the U.S. economy.
 It was the Canadian dollar’s highest level since it last reached U.S. dollar parity three weeks ago.
 “I don’t think (parity) has quite the same cache as it did a few years ago but it’s still a notable event,” said Eric Lascelles, chief Canada macro strategist at TD Securities.
 The jobs data lifted equities and resource prices, which support commodity currencies such as the Canadian dollar. But the main driver of the Canadian dollar’s rise has been the broad weakness in the U.S. dollar leading up to, and in the wake of, the Fed’s move.
  The Canadian currency dipped briefly early on Friday after data showed Canada’s economy added far fewer jobs than forecast. 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:nN05138916]
 “The pieces of the puzzle fit together really quite nicely today ... the outlier is the fact that the U.S. dollar is up versus most other currencies,” Lascelles added.
 “Part of that is that our employment report, when you got down to the bones of it, was actually pretty decent looking.”
  The Canadian dollar came very close to trading at par with its U.S. counterpart 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. [ID:nN04255002]
 The currency CAD=D4 finished Friday at C$1.0004 to the U.S. dollar, or 99.96 U.S. cents, up from Thursday’s close at C$1.0024 to the U.S. dollar, or 99.76 U.S. cents. It was up 2 percent for the week.
 Firas Askari, head of foreign exchange trading at BMO Capital Markets, said the next resistance level for the Canadian dollar is October’s high of 99.80 Canadian cents to the U.S. dollar, or US$1.002.
 Askari said large European banks acting on behalf of hedge funds, money managers and international pension plans were buying Canadian dollars, while large domestic banks representing corporate Canada were selling Canadian dollars to buy the greenback.
 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.
 This time, market watchers are predicting more sustained strength. “I don’t see any reason the Canadian dollar needs to retreat right now,” said TD’s Lascelles. [ID:nN03102293]
 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 13 Canadian cents to yield 1.475 percent, while the 10-year bond CA10YT=RR slipped 35 Canadian cents to yield 2.856 percent.
 “It’s been a pretty solid sell-off across the curve and a bit of flattener as well for Canada and the motivation again has been strong Canadian and U.S. data,” Lascelles added.  (Editing by Peter Galloway)                                                        

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