CANADA FX DEBT-C$ weakens after softer-than-expected jobs data

Fri May 10, 2013 9:57am EDT

* C$ dips to C$1.0127 vs US$, or 98.75 U.S. cents
    * Weakens to lowest level since April 29
    * Employment grows 12,500, vs 15,000 expected
    * Bond prices mostly lower

    By Andrea Hopkins
    TORONTO, May 10 (Reuters) - The Canadian dollar dropped to
its lowest against the U.S. dollar in almost two weeks after
Canadian employment data showed fewer jobs gains than expected
in April, erasing a week of strong gains by the currency.
    The Canadian economy added 12,500 jobs last month, clawing
back some of the 54,500 jobs lost in March, but the unemployment
rate stayed at 7.2 percent, Statistics Canada reported. A
Reuters survey of economists had forecast 15,000 new jobs.
 
    "The report on balance was probably slightly softer than
expected, so it's not a big surprise that we saw a bit of a
sell-off (of the Canadian dollar), but it does not change our
bigger view of the Canadian economy and what the Bank of Canada
is going to do," said Robert Kavcic, senior economist at BMO
Capital Markets. 
    "This is pretty consistent with an economy that has been
growing below potential, and we're not looking for any move from
the Bank of Canada until the second half of 2014, so this
wouldn't change any of that."
    The employment data - which showed strength in full-time job
gains but losses in the private sector - sent the Canadian
dollar tumbling lower, reversing what had been a steady
appreciation against its U.S. counterpart in May.
    At 9:43 a.m. (1343 GMT), the Canadian dollar traded
at C$1.0127, or 98.75 U.S. cents, well off Thursday's North
American session close at C$1.0075, or 99.26 U.S. cents. It
briefly sank as low as C$1.0139, or 98.63 U.S. cents, its
weakest level since April 29, before inching back.
    The currency had climbed to its strongest level in nearly
three months on Thursday, closing in on parity with the U.S.
dollar after gaining some 2-1/2 cents since late April.
    Over the longer term, the Canadian dollar is expected to
weaken against the greenback in the year ahead, according to a
Reuters poll published on Wednesday. Forecasters cited concern
about the economy's slow rate of growth compared with that of
the United States. 
    In global news, the yen made a decisive break through 100 to
the dollar to hit a 4-1/2 year low on Friday, triggering a rise
in safe-haven bond yields and supporting gains in European and
Japanese shares which hit new five-year highs. 
    U.S. Treasury 10-year note yield hit a one-month peak of
1.85 percent as the dollar gained on the yen, while
stock index futures signaled that Wall Street was set to resume
its recent record-breaking rise. 
    Prices for Canadian government bonds were mostly lower. The
two-year bond was down 3 Canadian cents to yield
0.990 percent, while the benchmark 10-year bond lost
38 Canadian cents to yield 1.843 percent.
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