CANADA FX DEBT-C$ weakens after disappointing jobs report

Fri Sep 5, 2014 9:46am EDT

* Canadian dollar at C$1.0885, or 91.87 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 5 (Reuters) - The Canadian dollar weakened
against the greenback on Friday after data showed the domestic
economy unexpectedly shed jobs last month, adding to evidence of
sluggish employment in Canada. 
    The pressure on the loonie was mitigated by a separate
report that showed jobs growth south of the border was weaker
than expected, which put broad pressure on the U.S. dollar.
 
    But Canada fared worse, dropping 11,000 jobs in August and
thwarting economists' forecasts for a gain of 10,000. The
loonie's reaction was initially choppy before ultimately pulling
lower. 
    "On its own, the Canadian data would probably weigh on the
Canadian dollar, but this report is coinciding with the U.S.
numbers that were weaker than expected as well," said Paul
Ferley, assistant chief economist at Royal Bank of Canada in
Toronto.
    "However, the actual decline here in Canada may tip the
scale in terms of a factor that puts downward pressure on the
Canadian dollar."
    The Canadian dollar was at C$1.0885 to the
greenback, or 91.87 U.S. cents, weaker than Thursday's close of
C$1.0874, or 91.96 U.S. cents.
    Economists have been optimistic that an acceleration in the
U.S. economic recovery would ultimately bode well for Canada,
whose largest trading partner is the United States. A slowdown
in jobs growth south of the border also hurts Canada's prospects
in the long run.
    "The Canadian economy needs a stronger U.S. economy at this
point, so the U.S. jobs report is bad news for the Canadian
dollar, too," said Doug Porter, chief economist at BMO Capital
Markets in Toronto.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3 Canadian cents
to yield 1.110 percent and the benchmark 10-year up
39 Canadian cents to yield 2.080 percent.

 (Additional reporting by Solarina Ho)
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