CANADA FX DEBT-C$ jumps on strong jobs data, close below C$1.03 seen positive

Fri Mar 8, 2013 4:39pm EST

* C$ at C$1.0291 versus US$, or 97.17 U.S. cents

* Robust Canadian, U.S. jobs reports boost currency

* C$ sharply stronger against euro, franc, Aussie, yen

* C$ weakens 0.2 percent on the week

By Alastair Sharp

TORONTO, March 8 (Reuters) - The Canadian dollar hit a one-week high on Friday after much better-than-expected jobs growth in February in both Canada and its main trading partner, the United States, before pulling back to end the session little changed.

Analysts said the close below C$1.03 to the greenback nonetheless signaled a technical victory for the loonie, as Canada's currency is colloquially known, after several failed attempts to breach C$1.0350, which would have been its weakest level since mid-2012.

Canada added almost 51,000 jobs in February, with strong gains in services industries that vaulted the total well past the 8,000 additions expected by analysts surveyed by Reuters.

"Today's jobs report is a big step in the right direction in terms of showing that the Canadian economy does have some underlying domestic strength," said Mark Frey, chief market strategist at Cambridge Mercantile Group.

He called the close below C$1.03 a "pretty significant reversal of fortunes" after several weeks of loonie weakness, and predicted the currency would likely establish a fresh range between C$1.03 and parity with the U.S. dollar in coming weeks.

The Canadian currency ended the week at C$1.0291, or 97.17 U.S. cents, after a C$1.0294 finish at Thursday's North American close. At one point it hit C$1.0234 to the greenback, or 97.71 U.S. cents, its best rate since Feb 28.

U.S. employers also stepped up hiring, pushing the unemployment rate to a four year-low, suggesting the world's biggest economy is gaining traction despite the blow from higher taxes and deep government spending cuts.

"It's hard to separate the impact given that we had two pretty stellar reports on employment in Canada and the U.S.," said Mazen Issa, a macro strategist at TD Securities.

The loonie often benefits from U.S. data suggesting growth south of the border, while the greenback rose sharply against a string of other currencies on its own jobs print.

Canada's currency strengthened against the Australian dollar and Japanese yen. It gained a full Canadian cent against the euro and the Swiss franc to touch its strongest level since late January against both those currencies.

For the week, the loonie fell 0.2 percent. The Canadian dollar had traded near eight-month lows on Wednesday after the Bank of Canada softened its stance on the need for tighter monetary policy.

But the week proved broadly positive on the data front, with the jobs surprise adding to positive numbers on housing starts and a narrowing trade balance.

Government bond prices were weaker across the curve, with the two-year bond down 6 Canadian cents to yield 0.987 percent and the benchmark 10-year bond falling 49 Canadian cents to yield 1.939 percent.

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