CANADA FX DEBT-C$ hit by disappointing Canadian jobs report

August 8, 2014

* Canadian dollar at C$1.0965 or 91.20 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Aug 8 (Reuters) - The Canadian dollar weakened against the greenback on Friday, hit by data that showed the country's economy added far fewer jobs than expected in July, underscoring the sluggish pace of employment growth.

Markets broadly were cautious overnight after U.S. President Barack Obama authorized air strikes on Iraq.

But that had little impact on the Canadian dollar in morning trading, with the jobs report top of mind. Canada's economy created a net 200 jobs last month, far short of the 20,000 economists had forecast. That comes on the heels of a loss of jobs in June.

The Canadian dollar reversed earlier gains against the greenback following the report to hit a session low of C$1.0968.

The report "certainly doesn't suggest any imminent move up on interest rates, just rates remaining fairly accommodative, so I think it will result in a bit of downward pressure on the (Canadian dollar)," said Paul Ferley, assistant chief economist at Royal Bank of Canada, in Toronto.

The Canadian dollar was at C$1.0965 to the greenback, or 91.20 U.S. cents, weaker than Thursday's close of C$1.0921, or 91.57 U.S. cents.

The loonie has lost about 2 percent in the last two weeks as signs that the U.S. economic recovery is picking up steam have sent investors toward the greenback, pushing the Canadian dollar lower.

The recent selloff erased the advance the currency made in a rally through June that saw it reach the low C$1.06 area.

Camilla Sutton, chief currency strategist at Scotiabank in Toronto, expects the Canadian dollar to trade comfortably on either side of the C$1.10 area from here.

"Overall, we still have significant geopolitical risk brewing and I think as U.S. dollar-Canadian had moved down close to C$1.06, it was really getting to a point that was too strong considering the domestic backdrop, and sitting at C$1.10 is a far more reasonable level for the currency to be at," she said.

Canadian government bond prices were higher across the maturity curve, with the two-year up 3 Canadian cents to yield 1.051 percent and the benchmark 10-year up 19 Canadian cents to yield 2.055 percent.

(Additional reporting by Allison Martell Editing by W Simon)