February 9, 2018 / 9:55 PM / 12 days ago

CANADA FX DEBT-C$ firms as Wall Street rally offsets jobs plunge

 (Adds analyst quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2596, or 79.39 U.S. cents
    * Loonie touches its weakest since Dec. 27 at C$1.2690
    * April rate hike chances slip to less than 50 percent
    * Bond prices higher across a steeper yield curve

    By Fergal Smith
    TORONTO, Feb 9 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Friday, rebounding from an
earlier six-week low, as gains for U.S. stocks offset the
biggest decline in domestic jobs in nine years.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.2596 to the greenback, or
79.39 U.S. cents.
    The currency's strongest level of the session was C$1.2561,
while it touched its weakest since Dec. 27 at C$1.2690.
    "It has been a very volatile day with equity markets going
up and down and FX has been mostly tracking that," said Daniel
Katzive, head of FX strategy North America at BNP Paribas.    
    U.S. stocks posted sharp gains on Friday, giving investors
some solace after a week of huge swings that shook the market
out of months of calm.             
    Commodity-linked currencies, such as the Canadian dollar
tend to underperform when stocks fall. For the week, the loonie
retreated 1.3 percent.
    Still, speculators raised bullish bets on the Canadian
dollar for the fifth straight week, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed. As
of Feb. 6, net long positions had risen to 40,164 contracts from
33,465 a week earlier.    
    The decrease of 88,000 Canadian jobs was unexpected, against
economists' forecasts for a gain of 10,000, and made for the
biggest decline since January 2009.             
    "The employment data wasn't so bad in the sense that the
full-time employment was up a lot, so I think the market
discounted that (the jobs data) pretty quickly," Katzive said.
    Full-time jobs rose 49,000. Last year, Canada's economy
added jobs at the fastest pace since 2002.
    The data tempered expectations for further interest rate
hikes from the Bank of Canada over the coming months.
    Chances of a hike in April slipped to less than 50 percent
from 58 percent before the jobs report, data from the overnight
index swaps market showed.           
    The Bank of Canada last month raised its benchmark interest
rate to 1.25 percent, its third hike since July.    
    The price of oil, one of Canada's major exports, slid as
U.S. futures fell below $60 a barrel for the first time since
December on renewed concerns about rising crude supplies.
            
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year            up 12 Canadian cents
to yield 1.785 percent and the 10-year             rising 18
Canadian cents to yield 2.352 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and Lisa
Shumaker)
  
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