* Canadian dollar at C$1.0881, or 91.90 U.S. cents
* Bond prices mostly higher across the maturity curve
(Adds details, quotes, updates prices)
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
a sluggish labor market 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, with a loss of 11,000 jobs in
August, thwarting economists' forecasts for a gain of 10,000.
Trading in the loonie was initially choppy before the currency
was ultimately pulled lower.
"Both jobs reports were pretty dismal but the Canadian
report definitely trumped the U.S. report on a relative basis,"
said Scott Smith, senior market analyst at Cambridge Mercantile
Group in Calgary. "Losing jobs on a month-over-month basis and
still having the full-time jobs be sluggish is definitely a
negative for the Canadian economy."
The Canadian dollar ended the North American
session at C$1.0881 to the greenback, or 91.90 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 U.S. jobs growth 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.
The Canadian dollar was little changed on a week that was
characterized by some sizeable moves both up and down. The
loonie benefited from a handful of positive factors earlier in
the week, including a strong trade number and a
less-dovish-than-expected policy statement from the Bank of
Canada.
"To not be able to follow through in terms of price action
and stay in the low C$1.08s or move back into the high C$1.07s,
I think it's very telling that the U.S. dollar/Canadian dollar
pair is still a buy on the dips," said Smith.
"For the most part, the U.S. dollar is going to be driving
the bus in terms of where we go," he said. "I think any sort of
strength in the loonie will probably be sold as corporate
interest takes note."
Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up 2 Canadian
cents to yield 1.115 percent and the benchmark 10-year
up 7 Canadian cents to yield 2.116 percent.
(Additional reporting by Solarina Ho; Editing by Leslie Adler)