* C$ hits C$0.9851 to the U.S. dollar, or $1.0151
* Reaches fresh 5-week low despite U.S. jobs report
* Economic fears persist, flight to safe-havens resumes
* Bond prices mostly weaker
(Updates, adds details, analyst comment)
By Andrea Hopkins
TORONTO, Aug 5 Canada's dollar weakened to a
five-week low against the U.S. currency on Friday, as solid
U.S. job growth failed to offset fears about a possible U.S.
downgrade and broad anxiety about the global economy.
Stonger-than-expected U.S. employment data and a mixed
Canadian jobs report initially reassured investors that the
U.S. economy was not falling back into recession. But sober
second thoughts about economic weakness and ongoing speculation
that U.S. sovereign debt may be downgraded spooked markets.
"We're just having fairly volatile sessions overall across
asset classes, same with equities -- it's been negative, then
positive, then negative. There's a lot of negativity and
certainly the Canadian dollar is subject to that," said Camilla
Sutton, chief currency strategist at Scotia Capital.
"There is a lot of speculation about what is ahead and one
of the rumors in the marketplace is whether or not the U.S.
will suffer a downgrade over the weekend. There is tremendous
amount of uncertainty generally," she added.
The Canadian dollar CAD=D4 fell as low as C$0.9851 to the
U.S. dollar, or $1.0151, down from C$0.9742, or $1.0265,
earlier in the session.
The midday drop brought the dollar to its weakest level
since June 28, well below Thursday's North American close of
C$0.9795 to the U.S. dollar, or $1.0209.
The currency had strengthened after a firm U.S. payrolls
report and a mixed Canadian employment report, but the sell-off
took hold late in the morning. [ID:nN1E77404O]
World stocks fell for an eighth session despite the
better-than-expected U.S. jobs report. Toronto's main index was
down nearly 4 percent at midday, while New York's Dow Jones
Industrial average was off nearly 2 percent as relief over the
employment data was short-lived. [.N] [.GSPTSE]
Global stocks plummeted on Thursday in the worst sell-off
since the depths of the 2009 U.S. recession, and
market-watchers had initially expected a rebound when the
employment data came in relatively strongly. But the buying did
not last, and commodity-linked currencies like Canada and
Australia got caught in the downdraft.
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.
Investors also remain cautious about contagion in Europe
from the debt crisis, which may now spread to Italy and Spain
Short-dated government bonds were mixed at midday. Canada's
two-year bond CA2YT=RR was up 3.5 Canadian cents to yield
0.999 percent, while the 10-year bond CA10YT=RR fell 29
Canadian cents to yield 2.532 percent.
(Editing by Jeffrey Hodgson)