December 6, 2019 / 9:29 PM / 3 months ago

CANADA FX DEBT-Loonie slides as jobs decline shows cracks in economy's resilience

 (Adds dealer quote and details throughout, updates prices)
    * Canadian dollar weakens 0.6% against the greenback
    * Canada's economy sheds 71,200 jobs in November
    * Loonie ends the week up 0.1%
    * Canada-U.S. 2-year spread narrows by 5.9 basis points 

    By Fergal Smith
    TORONTO, Dec 6 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, unwinding much of this
week's gains after data showing a slump in domestic jobs
suggested the economy was not as resilient as the Bank of Canada
had hoped.
    The Canadian job market lost 71,200 net positions in
November while the unemployment rate rose to 5.9%, the highest
in more than a year, data from Statistics Canada showed.
Analysts had forecast a gain of 10,000 jobs.             
    On Wednesday, the Bank of Canada left its benchmark interest
rate on hold at 1.75% as it cited sources of resilience in the
Canadian economy.             
    The jobs decline shows the economy is "not as resilient as
maybe the bank had conveyed" but is not going to trigger an
imminent cut to interest rates, said Scott Lampard, head of
global markets at HSBC Bank Canada.
    Chances of an interest rate cut at the central bank's next
meeting in January rose but were less than 20%, the overnight
index swaps market indicated.           
    The central bank said Governor Stephen Poloz will step down
when his seven-year mandate expires in June, which market
players had expected.                           
    At 3:51 p.m. (2051 GMT), the Canadian dollar          was
trading 0.6% lower at 1.3259 to the greenback, or 75.42 U.S.
cents. The currency, which notched a four-week high on Thursday
at 1.3158, traded in a range of 1.3173 to 1.3270.
    For the week, the loonie was on track to rise 0.1%.
    Speculators have raised their bullish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of Dec. 3, net long
positions had increased to 21,471 contracts from 20,344 in the
prior week.  
    The U.S. dollar        rallied on Friday against a basket of
major currencies after data showed the U.S. economy created many
more jobs than expected in November.             
    The price of oil, one of Canada's major exports, rose as a
meeting of OPEC and its allies agreed to deepen output cuts.
U.S. crude oil futures        were up 1.1% at $59.07 a barrel.
                    
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 5 Canadian cents to yield
1.654% and the 10-year             rising 31 Canadian cents to
yield 1.579%.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 5.9 basis points to a spread of 3.9 basis
points in favor of the Canadian bond.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and Tom
Brown)
  
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