CANADA FX DEBT-C$ weakens after surge in U.S. jobs

Fri May 2, 2014 9:46am EDT

* Canadian dollar at C$1.0982 or 91.06 U.S. cents

* Bond prices lower across the maturity curve (Adds details, quote, updates prices)

By Leah Schnurr

TORONTO, May 2 (Reuters) - The Canadian dollar weakened on Friday after data showed U.S. job growth increased at its fastest pace in more than two years in April, giving a boost to the greenback .

The U.S. economy added 288,000 jobs last month, while the unemployment rate fell to a 5-1/2 year low of 6.3 percent.

Canada does not release its monthly jobs report until next week, and the lack of major domestic economic data on Friday left the currency susceptible to the strengthening U.S. dollar after the jobs data.

The loonie hit a session low of C$1.1007 shortly after the data was released, but the currency pared declines as investors parsed some of the less cheery details of the report, particularly the decline in the labor force participation rate.

"While the market did get a little bit excited on that upside surprise, it feels like the market is a little skeptical in terms of the actual degree of the robustness of that number," said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto.

Investors will want to see a few more months of numbers to determine if the U.S. jobs growth is organic or just a bounce-back from the weather-related weakness earlier in the year, Issa said.

"That's why we're starting to see the Canadian dollar strengthen again after that initial weakness."

The Canadian dollar was at C$1.0982 to the greenback, or 91.06 U.S. cents, weaker than Thursday's close of C$1.0961, or 91.23 U.S. cents.

Investors were also watching geopolitical developments abroad after pro-Russian rebels shot down two Ukrainian helicopters. Ongoing tensions in Ukraine have prompted risk appetite in markets to ebb and flow in recent months.

"It seems to me that the situation continues to intensify, so there is some hesitancy with some market participants, but there's no real clear indications yet where that situation is going," Issa said.

Canadian government bond prices were lower across the maturity curve, with the two-year down 3.6 Canadian cents to yield 1.087 percent and the benchmark 10-year down 33 Canadian cents to yield 2.410 percent. (Editing by Peter Galloway)

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