* C$ closes at C$1.0309 to the U.S. dollar
* Up 1.9 percent on the week
* Bonds rise after weaker-than-expected U.S. jobs report
* Canadian employment report disappoints
(Updates to close, adds quote)
By Jennifer Kwan
TORONTO, Jan 8 (Reuters) - The Canadian dollar edged higher
against the U.S. currency on Friday as oil prices climbed and
the greenback stumbled after a disappointing U.S. employment
report tempered optimism about a swift economic recovery.
The U.S. dollar headed lower after the release of a
government report that showed U.S. employers unexpectedly cut
85,000 jobs in December. [FRX/]
"It's a story of U.S. dollar weakness," said Millan
Mulraine, economics strategist at TD Securities.
The currency finished at C$1.0309 to the U.S. dollar, or
97.00 U.S. cents, up from C$1.0350 to the U.S. dollar, or 96.62
The price of oil, a key Canadian export, climbed toward $83
a barrel, while gold prices were also higher. [O/R] [GOL/]
Commodity prices often influence the direction of the Canadian
In early trading the Canadian dollar dropped as low as
C$1.0386, or 96.28 U.S. cents, after the Canadian employment
report for December showed an unexpected loss of 2,600 jobs.
The Canadian unemployment rate held steady at 8.5 percent,
as forecast in a Reuters poll. The job losses, which followed a
gain of 79,000 jobs in November, are small enough to be
considered a flat reading, but disappointed the market
consensus for a 20,000 increase.
"The gain on employment (was) weaker than expected so
likely near term to put some downward pressure on Canada as it
suggests the Bank of Canada is going to be in no rush to start
tightening interest rates," said Paul Ferley, assistant chief
economist, Royal Bank of Canada.
Still, the broader trend is for more robust jobs growth,
said Derek Holt, economist at Scotia Capital.
"I personally dismiss both of these reports as being
historical artifacts as we turn the page to sustained jobs
growth in 2010," he said.
The Canadian currency rose 1.9 percent on the week.
BONDS GET A BID
Canadian bond prices climbed after the jobs reports in
tandem with U.S. Treasuries, with the U.S. bonds rising as
investors pared back bets on near-term interest rate hikes by
the U.S. Federal Reserve. [US/]
"It comes from what we've seen in the labor market report.
If we see a slower recovery evolving than what was priced into
the market then it suggests that bonds may get a bid going into
the next few months," Mulraine said.
The two-year government bond <CA2YT=RR> rose 15 Canadian
cents to C$99.89 to yield 1.309 percent, while the 30-year bond
<CA30YT=RR> rose 60 Canadian cents to C$114.35 to yield 4.121
Canadian government bonds outperformed U.S. issues, with
the two-year yield 34 basis points above its U.S. counterpart
from about 36 basis points in the previous session.
(Editing by Peter Galloway)