CANADA FX DEBT-C$ adds to weekly decline despite domestic jobs gain

BY Reuters | ECONOMIC | 12/02/22 10:05 AM EST

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Canadian dollar weakens 0.2% against the greenback

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For the week, the loonie was on track to fall 0.6%

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Canada adds 10,100 jobs in November

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Canadian bond yields rise across curve

TORONTO, Dec 2 (Reuters) - The Canadian dollar weakened against its broadly stronger U.S. counterpart on Friday as investors weighed U.S. and Canadian jobs data for its impact on the pace of central bank interest rate hikes.

The loonie was trading 0.2% lower at 1.3455 to the greenback, or 74.32 U.S. cents, after trading in a range of 1.3421 to 1.3520. For the week, it was on track to decline 0.6%.

Canada added 10,100 jobs in November, broadly in line with the forecast gain of 5,000, while the jobless rate fell to 5.1%, Statistics Canada said.

Money markets expect the Bank of Canada to raise interest rates by 25 basis points next Wednesday, with a roughly 15% chance of a larger move.

That's not much different than before the data but the terminal rate, or the endpoint for rate hikes, seen over the coming months climbed to 4.36% from 4.22% after stronger-than-expected U.S. jobs data that could complicate the Federal Reserve's intention to start slowing the pace of tightening this month.

The U.S. dollar rallied against a basket of major currencies and equity markets globally fell.

The price of oil, one of Canada's major exports, rose ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday and an EU ban from Monday on Russian crude. U.S. crude prices were up 0.4% at $81.51 a barrel.

Canadian government bond yields climbed across the curve, tracking the move in U.S. Treasuries. The 10-year was up 5.5 basis points to 2.889%. (Reporting by Fergal Smith; Editing by Andrea Ricci)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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