CANADA FX DEBT-C$ up but off 13-week high, bonds gain

* C$ rises to 98.37 U.S. cents

* Bonds gain in safety bid

* Flaherty not worried about C$ rise, cites strong economy

* Next up: Friday’s jobs data from Canada, U.S. (Updates throughout)

By Ka Yan Ng

TORONTO, Aug 5 (Reuters) - Canada’s dollar backed off a 13-week high against the U.S. dollar on Thursday, with volatility noted from comments by the country’s finance minister and ahead of North American job reports.

In an exclusive interview with Reuters, Finance Minister Jim Flaherty said the rise in Canada’s currency “makes sense” because investors are snapping up the country’s assets and the economy is growing nicely. [ID:nN05141152]

The comments contrasted with concerns he expressed last year about the currency’s sharp rise, which was seen at the time as a warning shot against speculators.

The finance minister also did not appear overly worried that the currency was nearing parity with the U.S. dollar, a level it has not seen since April.

“There was a period a year ago when there was a great deal of hand-wringing over Canadian dollar strength and that really has abated as Canada has emerged as one of the stronger economies in the world,” said Eric Lascelles, chief Canada macro strategist at TD Securities.

“I think the market will probably feel a little bit more comfortable in the sort of range it’s in right now and will not feel quite as pressing a need to shift back to a C$1.05 or C$1.06 level.”

The Canadian dollar CAD=D4 finished at C$1.0166 to the U.S. dollar, or 98.37 U.S. cents, easing from a 13-week high hit earlier at C$1.0107 to the U.S. dollar, or 98.94 U.S. cents. But the finish was still up from C$1.0176 to the U.S. dollar, or 98.27 U.S. cents, at Wednesday's close.

Flaherty’s comments had little lasting impact on the currency market, as investors were more focused on Friday’s employment reports from Canada and the United States. The data will help determine the health of two closely linked economies, both of which have shown varying degrees of recovery.

U.S. private-sector payrolls are seen rising a modest 90,000 in Friday’s data, and the unemployment rate is expected to climb to 9.6 percent, from 9.5 percent in June. [ECI/US]

In Canada, forecasters are expecting a gain of 15,000 jobs and a steady unemployment rate at 7.9 percent. [ID:nN30270191]

Possible merger and acquisition-related flows also helped the currency hit its session high and edge closer to parity, based on talk of a possible $20 billion-$25 billion deal in the oil and gas sector. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Insider segment:here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The parity view is beginning to gather a little more steam again, just as commodity prices are also finding some strength.

“It wouldn’t be a big stretch to think that we’ll just get there at some point in time. It’s all the commodity pricing. You’ve seen that as of late with the recent tick up of the base metals and oil at the same time the loonie has caught a bid,” Paul Taylor, chief investment officer at BMO Harris Investment Management Inc, said in a quarterly investment outlook.


Canadian government bond prices jumped along with U.S. Treasury issues after an unexpected rise in U.S. weekly claims for jobless benefits that boosted concern that Friday’s U.S. employment report could be weak.

Lascelles said that, even though this week’s jobless claims data will not figure into the July U.S. jobs report, the market is already sensitive to slower growth prospects.

The two-year bond CA2YT=RR was up 5 Canadian cents to yield 1.514 percent, while the 10-year bond CA10YT=RR was up 37 Canadian cents to yield 3.124 percent. (Additional reporting by John McCrank and Jennifer Kwan; editing by Rob Wilson)