CANADA FX DEBT-C$ weakens as U.S. data eclipses domestic jobs strength

Fri Dec 6, 2013 9:26am EST

* Canadian dollar at C$1.0647 or 93.92 U.S. cents
    * North American jobs reports pull C$ in both directions
    * Bond prices lower across maturity curve

    By Leah Schnurr
    TORONTO, Dec 6 (Reuters) - The Canadian dollar weakened
against the greenback on Friday as a strong domestic employment
report was offset by better-than-expected jobs figures in the
United States which bolstered expectations the Federal Reserve
could reduce its stimulus sooner rather than later.
    Trading was choppy early in the session with the loonie
retreating to its 3-1/2-year low shortly after the jobs reports
were released, matching a trough hit on Wednesday. 
    Data showed Canada added 21,600 jobs last month, far greater
than the 12,000 that economists had expected, while the
unemployment rate held at 6.9 percent. 
    The Canadian dollar firmed to a session high after the
report, but quickly whipsawed lower after a separate report
showed the U.S. economy created 203,000 jobs in November, also
better than forecast. 
    "All in all, in the medium-term, what is good for the U.S.
is good for Canada," said Camilla Sutton, chief currency
strategist at Scotiabank in Toronto.
    "However, I think in the short-term, the focus is really on
the outperforming U.S. number and the expectation that it is
pulling expectations for Fed tapering to January."
    The Canadian dollar was at C$1.0647 to the
greenback, or 93.92 U.S. cents, weaker than Thursday's close of
C$1.0641, or 93.98 U.S. cents. The loonie traded as low as
C$1.0708 and as high as C$1.0622.
    The currency has been hammered in recent weeks by a host of
factors, including a more dovish Bank of Canada, weak oil prices
and uncertainty about the path of monetary stimulus south of the
border.
    A faster timeline for the Fed reducing its $85 billion a
month in bond purchases is seen as bearish for the Canadian
dollar as the move is expected to reduce risk appetite and
benefit the U.S. currency.
    The strength of the jobs market is seen as key to
determining when the Fed will start to withdraw. Central bankers
next meet on Dec. 17-18.
    Government bond prices were mostly lower across the maturity
curve. The two-year bond was off 1-1/2 Canadian cents
to yield 1.094 percent, while the benchmark 10-year bond
 fell 30 Canadian cents to yield 2.681 percent.
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