CANADA FX DEBT-C$ posts biggest one-day gain since April as China drags on U.S.$
(Adds strategist comment, details; updates with closing figures) * Canadian dollar ends at C$1.2973, or 77.08 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, Aug 12 (Reuters) - The Canadian dollar rallied about 1 percent on Wednesday against a sharply lower U.S. dollar, which tumbled to its lowest level in a month against key currencies after China's currency moves sowed doubt over the Federal Reserve's rate hike timing. The U.S. central bank has made clear it plans to raise interest rates sometime this year and markets have been making bets that it could happen by September. "Anything that rattles Fed rate hike timing is obviously going to impact the U.S. dollar quite sharply. So this continues to be a U.S. dollar story," said Rahim Madhavji, president at Knightsbridge.com, a commercial foreign exchange dealing firm. But Madhavji believes the Fed will make a move despite market concerns, adding: "I don't think there's anything conclusive. I think it's all rhetoric for the most part." The currency, which is also sensitive to commodity price moves due to oil's status as a key Canadian export, also found some support in steady crude prices. After being hit hard on Tuesday over demand worries following China's devaluation of its currency, oil rose modestly on the softer greenback as well as lower crude stockpiles but remained close to multi-year lows. The Canadian dollar, which saw its biggest one-day gain since mid-April, ended at C$1.2973 to the greenback, or 77.08 U.S. cents, significantly stronger than the Bank of Canada's official close of C$1.3104, or 76.31 U.S. cents. The currency traded between C$1.2952 and C$1.3158 on Wednesday, the third session in a row in which the loonie experienced a swing of more than 1 percent. With China dominating the FX market this week, however, the Canadian currency - widely expected to weaken further - was mostly rangebound between C$1.2950 and C$1.32. Meanwhile, Canadian government bond prices were mixed across the maturity curve, with prices for the two-year bond down half a Canadian cent to yield 0.424 percent and the benchmark 10-year rising 10 Canadian cents to yield 1.395 percent. The Canada-U.S. two-year bond spread narrowed to -24.1 basis points, while the 10-year bond spread widened to -75.3 basis points. (Reporting by Solarina Ho, editing by G Crosse)
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