CANADA FX DEBT-C$ hits 4-month high; investors look to jobs report

Thu May 8, 2014 4:34pm EDT

* Canadian dollar at C$1.0823 or 92.40 U.S. cents
    * Bond prices mixed across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, May 8 (Reuters) - The Canadian dollar firmed to a
four-month high against the greenback on Thursday, after data
out of China eased concerns over the strength of the world's
second-largest economy, while investors turned their attention
to Friday's domestic unemployment report.
   The loonie also got some support from data that showed
Canadian housing starts rebounded in April, while new home
prices edged up in March. 
    The currency got off to a strong start overnight as
investors were cheered by data that showed China's exports and
imports returned to growth in April. 
    The Canadian dollar is sensitive to economic news from
China, a major consumer of natural resources. China had seen a
weaker-than-expected start to 2014, which prompted nervousness
over the prospects for global growth.
    "Those better numbers helped put some optimism out there
that there might be a floor under the weakness we saw in the
growth numbers for the first quarter in the Chinese economy and
we could see a rebound in the second quarter," said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    Momentum trading helped carry the loonie higher, adding on
to this week's strength that has seen the currency break away
from the trading range around C$1.10 it had been stuck in.
    After breaking the C$1.0940 support level earlier in the
week, "it just seems to be downside ever since" for the U.S.
dollar-Canadian dollar pairing, said Mazen Issa, senior Canada
macro strategist at TD Securities in Toronto.
    The Canadian dollar ended the North American
session at C$1.0823 to the greenback, or 92.40 U.S. cents,
stronger than Wednesday's close of C$1.0894, or 91.79 U.S.
cents. 
    The loonie touched a session high of C$1.0814, its highest
level since early January when the currency was on a sharp
descent. 
    "At this juncture, it's looking for a catalyst to provide
more medium-term direction," said Issa.
    "It really does put a great deal of importance on tomorrow's
employment report, which is being viewed now as a big pivot
point for the next leg in U.S. dollar-Canadian dollar."
    Friday's labor market report for April is expected to show
the Canadian economy added 12,000 jobs last month, cooling after
a surge of 42,900 in March. The unemployment rate is seen
holding steady at 6.9 percent.
    The Canadian dollar was also stronger against the euro
 on Thursday after European Central Bank President
Mario Draghi said the ECB is ready to take action next month to
boost the region's economy if updated inflation forecasts merit
it. The euro was at C$1.4985. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year was unchanged to
yield 1.075 percent. The benchmark 10-year rose 8
Canadian cents to yield 2.371 percent.

 (Editing by Chizu Nomiyama)
FILED UNDER: