CANADA FX DEBT-C$ firms on purchasing activity data; eyes on jobs

Thu Feb 6, 2014 4:41pm EST

* Canadian dollar at C$1.1070 or 90.33 U.S. cents
    * Bond prices weaker across the maturity curve


    By Leah Schnurr
    TORONTO, Feb 6 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Thursday, lifted by data that
showed a rebound in purchasing manager activity and as investors
turned their focus to Friday's dual jobs reports on both sides
of the border.
    The loonie was able to shrug off a decline early on Thursday
that had been prompted by a separate report that showed Canada's
trade deficit widened to its highest level in a year in
December. 
    The Canadian dollar ended the North American
session at C$1.1070 to the greenback, or 90.33 U.S. cents,
stronger than Wednesday's close of C$1.1080, or 90.25 U.S.
cents.
    "It was a day clearly dominated by the fundamentals," said
Gareth Sylvester, director at Klarity FX in San Francisco.
    The trade deficit ballooned to C$1.66 billion ($1.49
billion), almost C$1 billion more than economists had expected.
But the loonie reversed course to push higher after the Ivey
Purchasing Managers Index bounced higher in January after
contracting the month before.
    "The economic outlook for Canada is still opaque, there's
relative inconsistency in the data," Sylvester said.
    Last month's data that showed a similarly
larger-than-expected trade deficit for November, coupled with a
reading that showed a contraction in purchasing activity, had
sparked a selloff in the loonie in early January that turned out
to be the start of the most recent leg down in the currency.
    The loonie has regained some ground in recent sessions after
hitting a 4-1/2-year low last week. 
    Employment data due at 8:30 EST (1330 GMT) on Friday could
set the tone for markets, with hiring expected to pick up in
Canada after the economy unexpectedly shed jobs in December
.
    U.S. employment data, due to be released at the same time on
Friday, is forecast to show jobs growth also accelerated there
last month.
    "There is an expectation that we could see a positive print,
but if people want to blame the poor showing from both the
(U.S.) nonfarm payrolls and the Canadian labor report due to
major weather conditions, then arguably those conditions didn't
change as we got into January," said Sylvester.
    "So there could be an element of danger that we see a
disappointing print tomorrow."
    Canadian government bond prices were lower across the
maturity curve, with the two-year off one Canadian
cent to yield 0.983 percent and the benchmark 10-year
 down 35 Canadian cents to yield 2.436 percent.
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