CANADA FX DEBT-C$ weakens modestly as investors eye jobs report

Thu Aug 7, 2014 4:20pm EDT

* Canadian dollar at C$1.0921 or 91.57 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 7 (Reuters) - The Canadian dollar weakened
slightly against the greenback on Thursday, pulling back from
the previous session's strong gains as investor focus turned to
the key domestic labor market report at the end of the week.
    The day's move was more muted than the currency has seen
lately after having lost 1.6 percent in the last two weeks as
optimism that the U.S. recovery is picking up speed has sent
investors into the greenback, pushing the loonie lower.
    After Wednesday's rise on the back on better-than-expected
trade figures, the loonie was consolidating as investors look to
Friday's employment report, said Mazen Issa, senior Canada macro
strategist at TD Securities in Toronto.
    "That seems to be the chatter is that everyone is just
waiting for tomorrow's jobs numbers to be the next catalyst for
the next move in U.S. dollar-Canadian dollar," said Issa.
    The economy is forecast to have added 20,000 jobs in July
after unexpectedly losing jobs the month before. The
unemployment rate is seen holding steady at 7.1 percent.
 
    Ken Wills, currency strategist and broker at CanadianForex
in Toronto, expects to see a figure above consensus at around
28,000. That should see the loonie challenge the C$1.09 area but
it is unlikely to get as far as the next level at C$1.0880, he
said.
    "We need a number plus 30,000 or 35,000 I think to really
see it break further," said Wills.
    The Canadian dollar ended the North American
session at C$1.0921 to the greenback, or 91.57 U.S. cents,
weaker than Wednesday's close of C$1.0913, or 91.63 U.S. cents.
    The loonie saw little reaction to data earlier in the day
that showed the value of building permits issued in June surged,
contrary to economists' forecasts for a decline. 
    In the longer run, analysts still expect to see more
weakness for the currency.
    Wills expects that in the next few weeks, the Canadian
dollar will be trading around C$1.0950, and watching for a
catalyst to challenge the psychologically important C$1.10,
which could come from geopolitical concerns.
    "We're starting to see markets react to that so I think
that's likely where that catalyst will come from. I don't see
either central bank - Canada or the U.S. - changing their stance
in the next few months, so I think it'll probably come from
geopolitical."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2-1/2 Canadian
cent to yield 1.069 percent and the benchmark 10-year
 up 31 Canadian cents to yield 2.076 percent.

 (Editing by Grant McCool)
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