CANADA FX DEBT-Canadian dollar rebounds on crude rally

Mon Feb 9, 2015 10:00am EST
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* Canadian dollar at C$1.2458 or 80.27 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Feb 9 (Reuters) - The Canadian dollar was stronger
against the greenback on Monday as oil prices rallied for a
third straight session and helped give the commodities-linked
currency a lift.
    After retreating against the U.S. dollar on Friday on strong
U.S. jobs and wage data, the loonie was buoyed on Monday by an
OPEC forecast that demand for its oil would be greater than
expected this year, as well as figures that showed the number of
U.S. rigs drilling for oil fell to its lowest level since
December 2011. 
    Canada is a major crude exporting country, and its currency
has been especially sensitive to crude prices, which have
plunged more than 50 percent since last June.
    "If we can comfortably stay for a while above $50 (a barrel)
- that's a bit of an if - but if we can, that maybe does cap the
USD/CAD move to the upside, at least until the Fed begins to
hike (interest rates)," said Don Mikolich, executive director of
foreign exchange sales at CIBC World Markets.
    "With oil finding a bit of a bottom in the $50 range, it's
probably given us a little bit of support on USD/CAD. So for the
week we're looking at the C$1.23 to C$1.26 range."
    At 9:24 a.m. EST (1424 GMT), the Canadian dollar 
was at C$1.2458 to the U.S. dollar, or 80.27 U.S. cents, firmer
than Friday's close C$1.2524, or 79.85 U.S. cents.
    Friday's robust U.S. payrolls data has raised expectations
that the Federal Reserve could make its first interest rate hike
as early as mid-year. An increase would put the U.S. central
bank on a diametrically opposite path to that of the Bank of
Canada, which stunned markets last month with a rate cut, and is
now widely expected to cut rates again in March or April.
    Mikolich said Canada-U.S. rate spreads are favoring the
United States right now, putting pressure on the loonie, and
noted that 10-year spreads have touched five-year highs.
    Canadian government bond prices were higher across the
maturity curve, with the two-year climbing 4.5
Canadian cents to yield 0.475 percent and the benchmark 10-year
 rising 51 Canadian cents to yield 1.402 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)