December 7, 2018 / 9:46 PM / 5 days ago

CANADA FX DEBT-C$ jumps as record jobs gain catches market cold

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar rises 0.5 percent against greenback
    * Canada adds a record 94,100 jobs in November
    * Price of U.S. oil rises 2.2 percent
    * Canadian bond prices trade mixed across flatter yield
curve
    * Canada-U.S. 2-year spread narrows by 5 basis points

    By Fergal Smith
    TORONTO, Dec 7 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday after domestic data
showing a record increase in jobs caught the foreign exchange
market by surprise, pressuring investors who had been short the
loonie.
    The Canadian economy added 94,100 jobs in November on higher
full-time hiring, and the unemployment rate dipped to a new
all-time low of 5.6 percent, Statistics Canada said. Economists
had forecast a jobs gain of 11,000.             
    Meanwhile, U.S. data showed that job growth slowed in
November and monthly wages increased less than expected,
suggesting some moderation in economic activity.                
 
    "I think the market had been pretty heavily leaning toward a
continuation of weak (Canadian) data and strong U.S. data when
they were thrown a complete curveball," said Michael Goshko,
corporate risk manager at Western Union Business Solutions.
    "Given the fact that we had just made a one-and-a-half year
high the previous day (for USD-CAD), I think the market was
pretty long (U.S.) dollars."
    The most recent data from the U.S. Commodity Futures Trading
Commission and Reuters calculations have showed that speculators
were adding to bearish bets on the loonie.             
    At 4:00 p.m. (2100 GMT), the Canadian dollar          was
trading 0.5 percent higher at 1.3312 to the greenback, or 75.12
U.S. cents. The currency traded in a range of 1.3285 to 1.3400.
    For the week, the loonie was down 0.2 percent. It hit its
lowest in nearly 18 months on Thursday at 1.3445, following an
interest rate decision the day before by the Bank of Canada. The
central bank, which has hiked five times since July 2017, left
its benchmark rate on hold at 1.75 percent and dampened
expectations for additional hikes.             
    On Thursday, Bank of Canada Governor Stephen Poloz said the
economy was weaker than forecast and predicted that lower prices
for oil, one of Canada's major exports, would cut growth.
    But the price of oil rallied on Friday after major oil
producers agreed to reduce output. U.S. crude oil futures       
settled 2.2 percent higher at $52.61 a barrel.             
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 2 Canadian cents
to yield 2.002 percent and the 10-year             rising 18
Canadian cents to yield 2.071 percent.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 5 basis points to a spread of 71.7 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
  
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