CANADA FX DEBT-C$ strengthens after touching 6-week low as oil rises
* Canadian dollar at C$1.2435, or 80.42 U.S. cents * Bond prices mixed (Updates to close) By Andrea Hopkins TORONTO, May 28 (Reuters) - The Canadian dollar strengthened on Thursday after touching a six-week low earlier in the session, more than regaining lost ground as oil prices rose and the U.S. dollar retreated against other major currencies after a strong run. The greenback climbed to a 12-1/2-year high against the yen on Thursday as investors bet that U.S. interest rates will rise later this year. But the U.S. currency gave back much of the gain after Japanese Finance Minister Taro Aso said the yen's recent drop had been "rough," stirring expectations that the Bank of Japan may intervene to stem further decline in the currency. "It all started after the comment from the Japanese finance minister about the recent move in the yen, being a rough patch, so that caused the dollar-yen to sell off ... and coincided with generally softening of the (U.S.) dollar," said David Bradley, director of foreign exchange trading at Scotiabank. "Dollar-Canada had a little bit more of a gentle sell-off over course of the afternoon, mainly due to that and due to a turnaround in commodity sector as well, with oil rallying a little bit," he added. The Canadian dollar ended the North American session at C$1.2435 to the U.S. dollar, or 80.42 U.S. cents, stronger than Wednesday's official close of C$1.2459, or 80.26 U.S. cents. Earlier in the session it touched C$1.2538, its weakest since April 15. Oil prices rose in choppy trade, helping the turnaround of Canada's commodity-linked currency. The gain snapped two days of sharp declines, after data showed a fourth weekly drawdown in U.S. crude stocks. Signals from the Bank of Canada on Wednesday that it is in no hurry to raise rates helped weaken the Canadian currency through the C$1.25 barrier, traders said. The Bank of Canada said it will hold its benchmark rate steady. But some analysts questioned whether economic recovery in the United States will deliver the strong benefits to Canada that bank Governor Stephen Poloz said he expects from an increase in exports. Investors have now turned their attention to Canadian gross domestic product data for the first quarter, due out on Friday. Analysts polled by Reuters expect a 0.3 percent annualized rate of growth for the first three months of 2015. Canadian government bond prices were mixed across the maturity curve. The two-year rose 2 Canadian cents to yield 0.621 percent, while the benchmark 10-year was unchanged, yielding 1.667 percent. (Reporting by Andrea Hopkins; Editing by Peter Galloway and Steve Orlofsky)
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