CANADA FX DEBT-C$ strengthens after Canada GDP, U.S. jobs eyed

Thu Jan 31, 2013 11:23am EST

* C$ at C$0.9995 versus US$, or $1.0005
    * Canada GDP data for November slightly better than expected
    * Still near 13-month low vs euro
    * Attention turns to U.S. jobs data out on Friday

    By Alastair Sharp
    TORONTO, Jan 31 (Reuters) - The Canadian dollar notched
gains after the release of stronger-than-expected domestic
growth data on Thursday and was trading around equal value to
its U.S. counterpart as market focus moved to a key U.S. jobs
report out on Friday.
    The Canadian dollar looked on track to gain 0.6 percent
against the greenback this week, which would pare its losses for
January to roughly three-quarters of a percent. The currency
weakened last week after the Bank of Canada pulled back on its
rate-hiking bias.
    It was helped on Thursday by data that showed a bounce in
domestic economic growth in November after several months of
flat or tepid growth. 
    By mid-morning, the Canadian dollar was trading at
C$0.9995 to the greenback, or $1.0005, compared with C$1.0015,
or 99.85 U.S. cents, at Wednesday's North American close.
    That gain could be threatened if U.S. jobs data due out on
Friday comes in weaker than expected.
    "The Canadian dollar is as vulnerable, if not more so, to
U.S. economic weakness (as the U.S. dollar is)," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial. "Ultimately if we see a soft payroll number tomorrow
we could see some (U.S.) dollar strength against Canada."
    Against the greenback, some of the Canadian currency's gain
on Thursday could be attributed to month-end selling of U.S.
dollars by fund managers with hedged portfolios following recent
global equity gains, Spitz added.
    Against the euro, it traded near the 13-month low it notched
on Wednesday, illustrating the broader weakness of the Canadian
dollar.
    The U.S. Federal Reserve kept its bond-buying program in
place at the end of a two-day meeting on Wednesday, saying
economic growth had stalled. Gross domestic product data
released earlier in the day showed that the U.S. economy,
Canada's main export market, shrank in the fourth quarter of
2012. 
    These factors may have lowered expectations for the
closely-watched U.S. non-farm payrolls data due out on Friday,
though any disappointment in that reading would still hit the
Canadian dollar hard.
    "We're left beholden to labor market data in particular, and
that's why the number tomorrow is going to be so elevated in
terms of its potential market reaction," said Jeremy Stretch,
head of foreign exchange strategy at CIBC World Markets. "That's
going to be the driving force for sentiment vis a vis North
America in general, and to an extent the global backdrop as
well."
    National's Spitz said currency traders will also be watching
Japanese employment data and a reading on Chinese purchasing
manager activity overnight.
    The price of a two-year Canadian bond was up half
a Canadian cent to yield 1.163 percent, while the benchmark
10-year bond rose 2 Canadian cents to yield 1.994
percent.
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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