CANADA FX DEBT-C$ strengthens ahead of jobs, but weakness forecast

Reuters

* C$ at C$1.0440 vs US$, or 95.79 U.S. cents

* Bond prices mixed across curve

By Solarina Ho

TORONTO, Nov 6 (Reuters) - The Canadian dollar strengthened

against the U.S. dollar in subdued trade on Wednesday, bolstered

in part by positive economic data, but is seen weakening in the

coming weeks and months as bond yields are likely to slip back

toward those of its southern neighbor and main trading partner.

The pace of purchasing activity in Canada jumped in October

to 62.8 from 51.9 in September, far exceeding analysts'

expectations for a 51.0 reading. A figure above 50 indicates an

increase in the pace of activity.

Increased plans for housing construction helped edge the

value of Canadian building permits up by 1.7 percent in

September.

It was the seventh monthly advance for building permits

since the start of 2013, yet the total value in September was

only 0.2 percent higher than in September 2012, according to

Statistics Canada.

"The news wasn't too bad on both sides of the border ... So

we'll see where we go over the next two days with the remaining

data," said Don Mikolich, executive director, foreign exchange

sales CIBC World Markets.

"The market needs to see continued progress on Canadian

economic numbers to move further into the Canadian dollar and

with the Bank of Canada put a bit of a cloud over the forecast

last week."

The Canadian dollar closed at C$1.0418 versus the

greenback, or 95.99 U.S. cents, compared with C$1.0458, or 95.62

U.S. cents, at Tuesday's North American close.

The Canadian dollar, which was mostly outperforming its

major currency counterparts, will take further direction from

North American data , including key employment

figures on Friday.

In a Reuters poll released on Wednesday, the currency was

seen slipping to C$1.06 a year from now as the combined effect

of tighter future U.S. monetary policy and no imminent rate

hikes in Canada take hold.

While much attention in coming weeks will be on whether the

U.S. Federal Reserve will start to trim back its monetary

stimulus, Greg Moore, currency strategist at TD Securities, said

the Bank of Canada's recent dropping of a rate-hike bias would

likely cause weakness in the Canadian currency as short-term

bond yield spreads tighten.

"The Canadian yield advantage is on an eroding trend and

that should continue perhaps a little more sharply after the

messaging we heard in the past couple of weeks," he said.

The two-year bond was up 2 Canadian cents to

yield 1.120 percent, while the benchmark 10-year bond

was flat, yielding 2.537 percent.

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