CANADA FX DEBT-C$ rebounds on crude rally; diverging central banks still eyed
(Updates with fresh comment, closing figures, new details) * Canadian dollar at C$1.2465 or 80.22 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, in an otherwise quiet session. 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 low prices hit non-OPEC producers more quickly than previously expected. A drop in the number of U.S. rigs drilling for oil to its lowest since December 2011 also helped support crude prices. Canada is a major oil exporting country, and its currency has been especially sensitive to prices, which have plunged more than 50 percent since last June. "The key levers for the Canadian dollar continue to predominantly be oil prices in the short term on one side and on the flip side, the U.S. economy," said KnightsbridgeFX.com President Rahim Madhavji. "The overall story remains the divergence between the U.S. and the Canadian economy ... The Bank of Canada is leveraged to oil and the loonie is leveraged to both of those things together. That's why it has been so volatile." The Canadian dollar finished the session at C$1.2465 to the U.S. dollar, or 80.22 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 will raise interest rates 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 reduce rates again in March or April. "If we can comfortably stay for a while above $50 (a barrel) ... 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 little market moving domestic data expected this week, investors will remain focused on oil, as well as a speech by Senior Deputy Governor Carolyn Wilkins, the first since the bank's dramatic rate cut in January. Canadian government bond prices were higher across the maturity curve, with the two-year climbing 2.5 Canadian cents to yield 0.485 percent and the benchmark 10-year rising 23 Canadian cents to yield 1.430 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and Steve Orlofsky)
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