CANADA FX DEBT-C$ hit by disappointing Canadian jobs report

Fri Aug 8, 2014 4:28pm EDT

* Canadian dollar at C$1.0971 or 91.15 U.S. cents
    * Bond prices mostly higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 8 (Reuters) - The Canadian dollar weakened
against the greenback on Friday, hit by data that showed the
country's economy added far fewer jobs than expected in July,
underscoring the sluggish pace of employment growth.
    Markets broadly were rattled after U.S. President Barack
Obama authorized air strikes on Iraq, though news that Russia
was ending military drills near the Ukrainian border helped
soothe investors' concerns about a number of geopolitical risks.
 
    But the developments had little impact on the Canadian
dollar in morning trading, with the jobs report top of mind.
Canada's economy created a net 200 jobs last month, far short of
the 20,000 economists had forecast. That comes on the heels of a
loss of jobs in June. 
    The Canadian dollar reversed morning gains against the
greenback immediately following the report, eventually hitting a
session low of C$1.0985.
    "It was a pretty terrible number overall. There wasn't a lot
of positives that you could glean from that report, so we're
looking at a pretty sharp selloff," said Scott Smith, senior
market analyst at Cambridge Mercantile Group in Calgary.
    "Heading into the close today in the high C$1.09s, we're
probably looking at some continued momentum into next week for
higher U.S. dollar-Canadian dollar."
    The Canadian dollar ended the North American
session at C$1.0971 to the greenback, or 91.15 U.S. cents,
weaker than Thursday's close of C$1.0921, or 91.57 U.S. cents.
    Despite the muted response to the day's international
events, any escalation could be a bigger driver of price
direction next week, especially with a quieter North American
economic calendar, said Smith.
    "With all the different geopolitical scenarios right now,
it's definitely injecting some volatility into the market, which
is usually a negative for the loonie," though the currency could
see some support if oil prices rise, he said.
    The loonie has lost about 2 percent in the last two weeks as
signs the U.S. recovery is picking up steam have sent investors
toward the greenback.
    The recent selloff erased the advance the currency made in a
rally through June that saw it reach the low C$1.06 area.
    Camilla Sutton, chief currency strategist at Scotiabank in
Toronto, expects the Canadian dollar to trade comfortably on
either side of the C$1.10 area from here.
    "Overall, we still have significant geopolitical risk
brewing and I think as U.S. dollar-Canadian had moved down close
to C$1.06, it was really getting to a point that was too strong
considering the domestic backdrop, and sitting at C$1.10 is a
far more reasonable level for the currency to be at," she said.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up 1-1/2
Canadian cents to yield 1.059 percent and the benchmark 10-year
 up 11 Canadian cents to yield 2.064 percent.

 (Editing by Chris Reese)
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