CANADA FX DEBT-C$ touches 6-month high; focus turns to U.S. jobs

Wed Jul 2, 2014 4:25pm EDT

* Canadian dollar at C$1.0667 or 93.75 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, July 2 (Reuters) - The Canadian dollar was little
changed against the greenback on Wednesday, pulling back from a
six-month high hit in early trading that was undercut by data
showing surprisingly strong hiring by companies south of the
border.
    The loonie has been on an upward climb since early June,
gaining 2.6 percent, a rise that has been fueled in part by
higher than expected inflation in Canada and its implications
for central bank policy.
    Since that inflation report nearly two weeks ago, the
Canadian dollar has had momentum on its side as it has broken
through key technical levels.
    "The loonie's obviously benefiting from the momentum it has
had of late," said Rahim Madhavji, president at
KnightsbridgeFX.com in Toronto.
    "A lot of people have been covering their short positions
and that's exacerbating the move in the Canadian dollar."
Madhavji said the loonie was also feeling the effect of traders
positioning ahead of Thursdays U.S. unemployment data.
    The loonie touched a high of C$1.0627 in early morning
trading, its highest since early January, before the robust U.S.
jobs data cut the gain.
    U.S. companies hired 281,000 workers in June, marking the
biggest monthly increase since November 2012, according to
payrolls processor ADP. The U.S. dollar rose 0.2 percent against
a basket of currencies, to the detriment of the loonie.
 
    The report comes a day ahead of the U.S. government's more
comprehensive employment report for June, which will be closely
watched by the market. Economists forecast the economy added
212,000 jobs last month.
    The Canadian dollar ended the North American
session at C$1.0667 to the greenback, or 93.75 U.S. cents, a tad
stronger than Monday's official Bank of Canada close of
C$1.0670, or 93.72 U.S. cents. 
    Whether the Canadian dollar can break through C$1.06 will be
the next level traders will be watching, but any move into the
C$1.05s and beyond is likely to be temporary, said Camilla
Sutton, chief currency strategist at Scotiabank in Toronto.
    By the time the Bank of Canada's next policy meeting comes
up on July 16, "we'll likely be off the highs in the Canadian
dollar," she said.
    Indeed, a Reuters poll showed analysts expect the recent
rally may be running out of steam. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 6-1/2 Canadian
cents to yield 1.134 percent and the benchmark 10-year
 down 79 Canadian cents to yield 2.325 percent.

 (Editing by Chris Reese)
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