* C$ hits session low of C$1.0037 vs US$, or $0.9963
* Bond prices rally, outperform Treasuries
* Canada's economy sheds 21,900 jobs in January
By Claire Sibonney
TORONTO, Feb 8 The Canadian dollar slid to its
lowest level in more than a week on Friday after data showed
Canada unexpectedly lost jobs in January and housing starts were
much lower than forecast, spurring traders to reduce bets on an
interest rate hike this year.
Canada's economy shed 21,900 jobs last month, but a drop in
the number of people seeking work pushed the unemployment rate
down to a four-year low of 7.0 percent.
Market analysts had forecast a gain of 5,000 positions after
strong job gains in three of the previous four months.
"Clearly the 300,000 jobs creation last year was
unsustainable and we have to brace ourselves for something more
sustainable this year," said Stefane Marion, chief economist at
National Bank Financial.
"You might have to reassess your growth expectations for the
domestic economy this year, which means, in my view, that the
Bank of Canada remains on the sideline through this year and no
move before early 2014."
Overnight index swaps, which trade based on expectations for
the central bank's key policy rate, showed that after the data
traders lowered their already small bets on a rate hike in late
At 9:25 a.m. (1425 GMT), the Canadian dollar stood
at C$1.0026 versus the greenback, or 99.74 U.S. cents, almost
half a cent weaker than Thursday's North American session close
at C$0.9980, or $1.0020.
Following the jobs data, the currency hit a session low of
C$1.0037 against the U.S. dollar, or 99.63 U.S. cents, its
softest since Jan. 30. It was around $1.0006, or 99.94 U.S.
cents immediately before the employment report.
The Canadian dollar was already on weaker ground after
separate data earlier in the day showed domestic housing starts
plunged last month.
Marion predicted that the Canadian dollar can weaken 3 or 4
more cents from current levels. "From a Canadian perspective
what will really start to transpire over the next two months is
the downshift in domestic demand, particularly the construction
sector," he added, noting the country's cooling housing sector.
Canadian government bond prices rallied across the curve
following the disappointing economic indicators, outperforming
The two-year bond was up 5 Canadian cents to
yield 1.127 percent, and the benchmark 10-year bond
gained 20 Canadian cents to yield 1.972 percent.