CANADA FX DEBT-C$ buoyed by oil price rally

Tue Feb 3, 2015 10:01am EST
 
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* Canadian dollar at C$1.2540 or 79.74 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, Feb 3 (Reuters) - The Canadian dollar was stronger
against the greenback on Tuesday, bolstered in large part by
U.S. oil prices trading above $50 a barrel.
    Crude prices extended gains after British oil company BP
became the latest petroleum producer to reduce capital
expenditures, adding to expectations that spending cuts will
help trim output and deplete some of the excess supply that has
driven crude prices down about 50 percent since June.
    Canada is a major crude exporter and its currency has
tracked plummeting oil prices. But the loonie has rebounded in
recent sessions from a nearly six-year low of C$1.28 against the
greenback, or 78.13 U.S. cents, helped by a more than 13 percent
rebound in oil prices. 
    "Oil has been the catalyst that's got things moving ... but
(investor) positioning is really exaggerating the moves," said
Adam Cole, global head of FX strategy at RBC Capital Markets in
London.
    "CAD throughout the course of January was by far worst
performer in G10 space. We have in the past found that CAD - the
commodities currencies - have a tendency to overshoot in
January."
    At 9:30 a.m. EST (1430 GMT), the Canadian dollar 
was at C$1.2540 to the greenback, or 79.74 U.S. cents, stronger
than Monday's close of C$1.2577, or 79.51 U.S. cents.
    On the data front, investors were awaiting Canadian trade
numbers for December as well as January employment figures for
the United States and Canada later in the week for more insight
into the health of the neighboring economies.
    Strategists still forecast further weakness in the Canadian
dollar, with the Bank of Canada widely expected to cut interest
rates again as early as next month.
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year down 5.5 Canadian
cents to yield 0.421 percent and the benchmark 10-year
 was 41 Canadian cents to yield 1.277 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)