Canadian dollar ends above US$1.07 after jobs data

By Frank Pingue

TORONTO, Nov 2 (Reuters) - The Canadian dollar capped off a
historic week with a sharp gain against the U.S. currency on
Friday, rising on a solid Canadian jobs report and another
surge in oil prices.

Bond prices turned lower after the upbeat Canadian jobs
report and appeared to ignore a rally in the bigger U.S.
Treasury market.

The Canadian dollar closed at US$1.0704, valuing each U.S.
dollar at 93.42 Canadian cents, up from Thursday's close of
US$1.0512, or 95.13 Canadian cents.

Early in the session, the Canadian dollar hit US$1.0729, or
93.20 Canadian cents, which marked the currency's highest level
since the late 1800s, when it was at US$2.78.

The surge in the dollar, which rallied all week along with
oil prices and after a U.S. Federal Reserve decision to lower
interest rates, came after figures showed the Canadian economy
gained six times more jobs than expected in October.

The data also showed wages in Canada climbed 4 percent on
the year and that the unemployment rate fell to a 33-year low
of 5.8 percent in October from 5.9 percent in September.

"There's nothing in this report to stop the Canadian dollar
other than people getting tired of buying it," said David Watt,
senior currency strategist at RBC Capital Markets.

"And there is absolutely nothing in that report which
suggests that the Bank of Canada is going to do anything except
sit back and watch what is going on."

A U.S. jobs report also came in comfortably ahead of
expectations and resulted in further gains for the Canadian
dollar. Canada has a strong trade relationship with the United
States, so a strong economy south of the border is positive for
Canadian exports.

Evidence of a hot job market and wage growth that outpaces
inflation limits the Bank of Canada's options to cut interest
rates because lower rates could let inflation creep too high.

The Bank of Canada will announce its next policy decision
on Dec. 4 and a Reuters poll survey taken on Friday showed 11
of Canada's 13 dealers forecast the central bank will leave
interest rates steady at 4.50 percent. One dealer called for a
25 basis point cut and another gave no forecast.

BONDS FALL

Canadian bond prices moved lower, due in part to the solid
economic jobs data from Canada and the United States, which
some dealers used as an excuse to take profits following sharp
gains on Thursday when equity markets were hammered.

The jobs report extends a string of upbeat Canadian data
that has shaken bond markets for much of the year, but the
latest drop was thought to be rather mild by some considering
the strength of the jobs reports.

"You've had two barn-burners today and I'm surprised at how
little the market is actually selling off," said Eric
Lascellÿes, chief economics and rates strategist at TD
Securities.

The two-year bond slipped 9 Canadian cents to C$100.27 to
yield 4.112 percent, while the 10-year bond fell 37 Canadian
cents to C$97.63 to yield 4.304 percent.

The yield spread between the two-year and 10-year bond
moved to 19.2 basis points from 18.8 at the previous close.

The 30-year bond slid 73 Canadian cents to C$110.51 to
yield 4.363 percent. In the United States, the 30-year treasury
yielded 4.619 percent.

The three-month when-issued T-bill yielded 4.00 percent,
unchanged from the previous close.