* C$ at C$0.9746 to the U.S. dollar, or $1.0261
* Pulls back from 5-week low after U.S. jobs report
* U.S. jobs data eases recession fears
* Canadian data helps support market
* Bond prices fall as safe-haven bid fades
By Andrea Hopkins
TORONTO, Aug 5 Canada's dollar strengthened
against the U.S. currency on Friday morning, rebounding from a
five-week low, after stronger-than-expected U.S. jobs data
eased fears about a recession and calmed jittery investors.
The U.S. data came on the heels of a Canadian employment
report that showed the unemployment rate in July at its lowest
level since December 2008 and strong private-sector job gains.
But overall hiring was lower than analysts had forecast.
U.S. job growth accelerated more than expected in July as
private employers stepped up hiring, a development that eased
fears that the economy was sliding into another recession.
"The U.S. number on top of the Canadian data helps Canada
overall -- it's not all doom and gloom anymore," said Sebastien
Lavoie, economist at Laurentian Bank of Canada BLC Securities
"Basically, talks of a U.S. recession and rate cuts in
Canada were erroneous."
Canada's unemployment rate fell to 7.2 percent in July, its
lowest level since December 2008, from 7.4 percent in June,
though this was more due to people dropping out of the labor
market than to new employment. [ID:nN1E77404O]
Statistics Canada said the economy managed to eke out 7,100
new jobs, after picking up 28,400 jobs in June.
The increase was less than half that expected in a Reuters
survey of analysts but was marked by a healthy switch to
full-time and private-sector employment.
The Canadian dollar, which had strengthened on the Canadian
jobs report, climbed further after the strong U.S. data.
The Canadian dollar CAD=D4 rose to C$0.9746 to the U.S.
dollar, or $1.0261, after the data, well up from Thursday's
North American close of C$0.9795 to the U.S. dollar, or
U.S. and Canadian stock markets rebounded after plunging on
Thursday in one of the worst trading days since the 2009
recession as fears about a slowdown in U.S. economic growth and
its knock-on effect in Canada receded.
Investors remain cautious, however, about contagion in
Europe from the debt crisis, and Lavoie said the European
anguish remains the biggest factor holding back the Canadian
"The main risk for the Canadian dollar is the possibility
of contagion in Italy and Spain, not an economic recession," he
He said a string of healthy economic data in Canada has
increased the likelihood that the Bank of Canada will raise
interest rates late in 2011, a possibility the market had begun
to discount after soft U.S. data suggested Canada's largest
trading partner was falling back into recession.
"September is not in the cards as we were expecting, but I
still have hopes the Bank of Canada will lift rates before the
end of the year," he said.
Higher rates in Canada would attract more investors and
push up the currency, especially since the U.S. Federal Reserve
has not yet begun to unwind easier monetary policy.
Short-dated government bonds fell after the robust jobs
data as their flight-to-safety allure faded.
Canada's two-year bond CA2YT=RR was down 9 Canadian cents
to yield 1.063 percent, while the 10-year bond CA10YT=RR fell
79 Canadian cents to yield 2.588 percent.
(Editing by Peter Galloway)