January 8, 2009 / 3:56 PM / 12 years ago

CANADA FX DEBT-C$ edges higher as greenback weakens

* C$ holds on to gains as greenback pressured by weak data

* Bonds mixed ahead of jobs data as Toronto stocks fall

By Jennifer Kwan

TORONTO, Jan 8 (Reuters) - The Canadian dollar held on to gains against the U.S. currency on Thursday as the greenback weakened, but the loonie was expected to remain largely range bound ahead of key monthly employment data due on Friday.

Bonds were flat to higher across the curve as the Toronto stock market weakened on a slump in the price of oil.

At 10:08 a.m. (1508 GMT), the Canadian currency was at C$1.1861 to the U.S. dollar, or 84.31 U.S. cents, up from C$1.1971 to the U.S. dollar, or 83.54 U.S. cents, on Wednesday.

“One of the things we’re seeing is the U.S. dollar stay under pressure across the board,” said George Davis, chief technical strategist, RBC Capital Markets.

The greenback was pressured by U.S. weekly jobless data [FRX/], while bleak economic numbers in Europe and retail sales figures strengthened the case for more stimulus efforts. [ID:nSP409831]

Those reports followed U.S. private sector employment data on Wednesday that heightened fears about a prolonged recession.

The stage is now set for Friday’s release of December employment data on both sides of the border.

In Canada, the Ivey purchasing managers index fell to 39.1 in December from 40.2 in November [ID:nTAR001659], showing a contraction in purchasing activity, but economists expected the data to have a negligible impact on the Canadian currency given the focus on employment data.

Oil prices CLc1 were weaker at around $42 a barrel on Thursday, after slumping more than 12 percent in the previous session on bigger than expected buildup in inventories [ID:nSP386989], but were not a major factor for the Canadian dollar. Canada is a major oil producer and exporter.


Canadian bond prices were flat to higher, helped by lower stock markets, but trade was made cautious by hesitation before Friday’s jobs data and by continuing concerns about swelling supply.

“The theme of the new year has been one of bond bearishness and of selloffs and so there is perhaps a bit of an unwind of that,” said Eric Lascelles, chief economics and rates strategist at TD Securities.

The two-year bond was down 2 Canadian cents at C$102.99 to yield 1.145 percent, while the 10-year bond rose 10 Canadian cents to C$110.85 to yield 2.919 percent.

The yield spread between the two-year and 10-year bond was 177 basis points, versus 176 at the previous close.

The 30-year bond was flat to yield 3.704 percent. In the United States, the 30-year treasury yielded 3.0247 percent. (Reporting by Jennifer Kwan; editing by Peter Galloway)

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