CANADA FX DEBT-C$ weakens; seen staying on downward path

Fri Aug 1, 2014 4:39pm EDT

* Canadian dollar at C$1.0926 or 91.52 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 1 (Reuters) - The Canadian dollar weakened
against the greenback on Friday and looked set to mark its worst
week since March as expectations of a strengthening economy
south of the border continued to benefit the U.S. dollar against
the loonie.
    Driving market action was data that showed the United States
added 209,000 jobs in July. The loonie initially cut some losses
on that report, which fell short of economists' forecasts, but
then weakened again through the afternoon. 
    "The report overall was pretty solid, even if markets were
initially disappointed," said Benjamin Reitzes, senior economist
at BMO Capital Markets in Toronto.
    Optimism that the U.S. recovery is picking up steam has sent
investors running toward the greenback, one of the main reasons
for the Canadian dollar's decline this week. The trend was
underscored by stronger-than-expected U.S. economic growth
figures earlier in the week.
     "That will be the theme for some time. Really, it's been
the theme for a while, you just had to get that U.S. data,"
Reitzes said. 
     The loonie was down about 1 percent for the week, after
declining in four of five sessions and extending a selloff that
started last Friday.
     The Canadian dollar ended the session at C$1.0926
to the greenback, or 91.52 U.S. cents, according to the Bank of
Canada, weaker than Thursday's close of C$1.0904, or 91.71 U.S.
cents. The loonie touched an eight-week low in early morning
trading.
    Analysts expect that the loonie still has further to fall,
with many seeing it at the C$1.10 level in the near term. The
recent declines have marked a reversal from a Canadian dollar
rally that stretched through much of June.
    "One of the patterns of U.S. dollar-Canadian dollar over the
last few years has been the loonie will, for a period of time,
manage to grind out some pretty good gains," said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary. 
    "And when it flips around, and we start looking at the U.S.
data, it seems like when the U.S. dollar gains strength, it does
so in a rapid manner." 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 5 Canadian cents
to yield 1.071 percent and the benchmark 10-year up
39 Canadian cents to yield 2.119 percent.

 (Editing by Peter Galloway)
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