CANADA FX DEBT-Weak Canadian jobs report sends C$ to two-week low

Fri Jul 11, 2014 9:25am EDT

* Canadian dollar at C$1.0708 or 93.39 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, July 11 (Reuters) - The Canadian dollar weakened to
a two-week low against the greenback on Friday after data showed
the country's economy unexpectedly lost jobs last month,
solidifying expectations the central bank will stand pat next
week.
    Canada shed 9,400 jobs in June, frustrating economists'
expectations for a gain of 20,000, while the unemployment rate
ticked up to 7.1 percent. 
    The disappointing figures sent the Canadian dollar to a
session low of C$1.0712.
    As well as pointing to a pace of jobs growth that has
stalled in Canada, the report also underscored that the Bank of
Canada is likely to maintain its neutral tone when it releases
its monetary policy statement next week.
    "Certainly this report implies downward pressure in Canada,
so I think today's data will temper some of the enthusiasm we
have recently been seeing for the Canadian dollar, as it
suggests the Bank of Canada is likely going to remain on the
sidelines," said Paul Ferley, assistant chief economist at Royal
Bank of Canada in Toronto.
    The Canadian dollar was at C$1.0708 to the
greenback, or 93.39 U.S. cents, weaker than Thursday's close of
C$1.0647, or 93.92 U.S. cents.
    The loonie touched a six-month high last week, the
culmination of a month-long rally spurred by
stronger-than-expected domestic inflation, stronger oil prices
and short covering.
    But that momentum has faded in recent sessions ahead of the
Bank of Canada meeting on July 16. Investors are watching to see
whether the central bank will alter its message on inflation,
though analysts expect the still-lackluster economic growth will
allow the Bank of Canada to stay cautious. 
    That could weigh on the Canadian dollar in coming sessions.
    "Right now, I think this is the direction that we'll
continue to move, just as the Bank of Canada will be more dovish
than some people think next week," said David Tulk, chief Canada
macro strategist at TD Securities in Toronto.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2-1/2 Canadian
cents to yield 1.109 percent and the benchmark 10-year
 up 25 Canadian cents to yield 2.213 percent.

 (Additional reporting by Euan Rocha and Solarina Ho; Editing by
Meredith Mazzilli)
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