CANADA FX DEBT-C$ rebounds with crude as risk sentiment strengthens

Thu Feb 12, 2015 10:01am EST
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* Canadian dollar at C$1.2505 or 79.97 U.S. cents
    * Bond prices rise across the maturity curve

    By Solarina Ho
    TORONTO, Feb 12 (Reuters) - The Canadian dollar was stronger
against a globally weaker greenback on Thursday as crude prices
rose and the market grew a bit more confident about taking risk
following a ceasefire deal in the Russia-Ukraine conflict.
    Prices for oil, a major Canadian export, rebounded as
industry spending cuts and a softer greenback offset jitters
about record supply levels. The U.S. dollar weakened broadly
following a media report that the Bank of Japan saw further
monetary stimulus as counter-productive.  
    As a backdrop, Germany, France, Russia and Ukraine agreed on
a deal on Thursday that offers a "glimmer of hope" for an end to
fighting in eastern Ukraine after marathon overnight talks.
    "Energy in general is still obviously a key factor here when
it comes to the loonie ... There's a real spectrum of factors
that net-net are, from global economic perspective, somewhat
bullish," said Brad Schruder, director of foreign exchange at
BMO Capital Markets.
    "This retracement from yesterday when we almost broke
C$1.27, is probably more flow related than it was any
fundamental shift."
    At 9:32 a.m. EST (1432 GMT), the Canadian dollar 
was at C$1.2505 to the U.S. dollar, or 79.97 U.S. cents, firmer
than Wednesday's close of C$1.2641, or 79.11 U.S. cents.
    Schruder said any strength in the Canadian dollar will be
short-lived, noting that the Bank of Canada's comments earlier
this week that the Canadian economy was operating below
potential continue to weigh.
    "(The comments) still cast a very ominous pall over the view
for the Canadian dollar ... It's hard to get really excited
about a currency when the central bank is giving signs they're
fine with the currency weakening," he said.    
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3.5 Canadian
cents to yield 0.418 percent, and the benchmark 10-year
 climbing 19 Canadian cents to yield 1.431 percent.

 (Reporting by Solarina Ho; Editing by Chizu Nomiyama; and Peter