CANADA FX DEBT-C$ pares losses on U.S. jobs data

Fri Feb 1, 2013 9:44am EST

* C$ at C$0.9990 to US$, or $1.0010
    * Modest U.S. jobs growth give slight boost to C$
    * C$ at fresh 13-month low vs euro

    By Alastair Sharp
    TORONTO, Feb 1 (Reuters) - The Canadian dollar pared losses
against its U.S. counterpart on Friday after data showed steady
U.S. jobs growth, but the currency's move was limited by the
lack of impetus for the Federal Reserve to change its
accommodative monetary stance.
    U.S. job growth grew modestly in January and gains in the
prior two months were bigger than initially reported, supporting
views the economy of Canada's main trading partner was on track
for a sluggish recovery despite a surprise contraction in output
in the final three months of 2012. 
    "The only surprise was that there was a large revision
higher, so I would suspect the move in dollar/Canada has been on
that revision higher for the December and November period," said
Camilla Sutton, chief currency strategist at Scotiabank.
    She described the report as "mildly positive" for the
Canadian dollar, but said the impact was modest because it is
unlikely to shift the policy outlook for the U.S. Federal
Reserve, which has tied its monetary stance to improvement in
the labor market.
    At 8:55 a.m. (1355 GMT) the Canadian dollar was
trading at C$0.9990 to the greenback, or $1.0010, weaker than
Thursday's North American close of C$0.9973, or $1.0027. It had
traded as weak as C$1.0006 before the release of the U.S.
non-farm payrolls data for January. 
    But against the euro, the Canadian dollar 
weakened to a fresh 13-month low of C$1.3669 as the single
currency recorded broad gains on a positive outlook for the euro
zone. 
    It has weakened by more than 5 percent against the surging
euro since early January. 
    "Euro/Canadian dollar is on a tear at the moment and it
looks like for all the world it's going to trade up to C$1.42,"
said Shaun Osborne, chief currency strategist at TD Securities.
    Scotiabank's Sutton said traders' attention will now turn to
a European Central Bank policy meeting next week where dovish
voices may be heard on the euro's rise, China data over the
weekend, and Canada's own employment report at the end of next
week. 
    She said the Canadian currency would likely test resistance
at C$0.9902 as reallocation away from the currency is somewhat
reversed over the next week, with C$1.01 capping any weakness.
    While the Canadian economic data calendar on Friday is
sparse, other U.S. data on tap in the trading session includes
the ISM manufacturing index, construction spending and vehicle
sales. 
    The price of a two-year Canadian government bond 
rose 2 Canadian cents to yield 1.153 percent, while the
benchmark 10-year bond added 14 Canadian cents to
yield 1.973 percent.
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