CANADA FX DEBT-C$ firms to 3-1/2 week high after topping key level

Wed Sep 11, 2013 5:11pm EDT

* C$ at C$1.0315 vs US$, or 96.95 U.S. cents

* C$ breaks through 100-day moving average

* Bond prices higher across curve

By Solarina Ho

TORONTO, Sept 11 (Reuters) - The Canadian dollar was stronger against its U.S. counterpart on Wednesday, breaking through the 100-day moving average after a string of solid daily gains prompted by last week's stronger-than-expected domestic jobs report.

Divergent North American job reports last Friday were a key impetus for the Canadian dollar's rise. The reports showed Canada added almost three times as many jobs as expected, while U.S. employers hired fewer workers than expected.

A string of solid data out of China has also helped lift investor sentiment.

"September has been a runaway month for the Canadian dollar," said Adam Button, currency analyst at ForexLive in Montreal. "Jitters about emerging markets have completely faded away and the Canadian dollar has piggy backed on better global growth sentiment."

The Canadian dollar, which finally breached the 100-day moving average of C$1.0334 on Wednesday, finished the North American session at C$1.0315 to the greenback, or 96.95 U.S. cents. This was firmer than Tuesday's close at C$1.0348, or 96.64 U.S. cents.

The loonie, as Canada's currency is colloquially known, had closed at C$1.0506 last Thursday before the jobs data and has gained some 2 percent so far this month. It traded at its strongest level since August 16.

"The U.S. dollar has been the standout performer this year. It's just taking a break right now," said Button, who does not expect the Canadian dollar to strengthen much further.

The greenback fell to near two-week lows against major currencies on Wednesday.

Investor focus on the Federal Reserve is expected to sharpen in the coming days amid expectations the U.S. central bank will begin trimming its bond buying program when it meets next week, a move that should bolster the U.S. dollar.

Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London, said that investors will likely closely watch two U.S. data releases later this week - jobless claims and retail sales - as the "last pieces of the economic jigsaw" ahead of a Federal Reserve meeting.

The commodities-linked Canadian dollar could also take some cues from its sister currency, the New Zealand dollar , following the outcome of the Reserve Bank of New Zealand's policy statement due on Thursday.

Government bond prices were higher across the maturity curve. The two-year bond was up 3.5 Canadian cents to yield 1.292 percent, while the benchmark 10-year bond rose 28 Canadian cents to yield 2.782 percent.

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