CANADA FX DEBT-C$ hits weakest level since 2009; jobs data in view

Thu Jan 9, 2014 4:42pm EST

* Canadian dollar at C$1.0852 or 92.15 U.S. cents
    * Hits lowest point since October 2009
    * Bond prices higher across the maturity curve


    By Andrea Hopkins
    TORONTO, Jan 9 (Reuters) - The Canadian dollar weakened to a
more than four-year low against the greenback on Thursday and
was at risk of falling further after the release of North
American jobs data on Friday, reinforcing expectations the
currency is in for a rocky 2014.
    The recent selloff continued unabated as investors digested
a round of monthly domestic housing data that showed Canadian
building permits fell more than expected, as did housing starts,
while home prices were unchanged. 
    At the same time, first-time claims for U.S. unemployment
benefits declined more than expected last week, building
expectations that the U.S. nonfarm payrolls report for December,
due out on Friday, will show healthy job gains. 
Canada's employment report for December is also set for release
on Friday.
    "As we lead into tomorrow's dual employment releases, things
can get particularly interesting as there has been building
expectations for a strong U.S. nonfarm, and that would drive
U.S. dollar strength," said Camilla Sutton, chief currency
strategist at Scotiabank.
    "Currencies have a way of overshooting, so it could be
fairly negative (tomorrow). The next real resistance level is
C$1.09, so we've been very close to that today. All in all, a
break of C$1.09 would be very significant."
    Canada's currency has not been as weak as C$1.09 since
October 2009. On Thursday, it hit a session low of C$1.0875, a
level also not seen since October 2009.
    The loonie ended Thursday's North American session
at C$1.0852 to the greenback, or 92.15 U.S. cents, weaker than
Wednesday's close of C$1.0804, or 92.56 U.S. cents. 
    The Canadian dollar has fallen for five straight sessions as
bearish sentiment has grown. A dovish Bank of Canada and the
gradual unwinding of the U.S. Federal Reserve's bond purchases
are expected to continue to weigh on the currency.
    The most recent drop was sparked by data earlier in the week
that showed a steep widening of Canada's trade deficit, while
the U.S. trade deficit fell to its lowest in four years.
    "It's tough to stop this momentum once you get going," said 
Benjamin Reitzes, senior economist at BMO Capital Markets in
Toronto.
    "The market gets its mind made up and wants the (U.S.)
dollar higher and that's the way it's going to go."     
    Technical resistance for the U.S. dollar-Canadian dollar
should lie at C$1.09 and C$1.1235, he said. 
    In Friday's jobs report, the Canadian economy is forecast to
have added 14,600 jobs in December, though that is down from
21,600 the previous month. The unemployment rate is seen holding
steady at 6.9 percent. 
    Analysts said that a number that comes in significantly
below market expectations could put further pressure on the
loonie. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2.8 Canadian
cents to yield 1.098 percent, and the benchmark 10-year
 up 26 Canadian cents to yield 2.688 percent.
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