CANADA FX DEBT-Canadian dollar rallies as oil prices soar
(Adds closing figures, strategist comments, details) * C$ ends at C$1.3157 vs US$, or 76.01 U.S. cents * Bond prices mostly fall across the maturity curve By Solarina Ho TORONTO, Aug 31 (Reuters) - The Canadian dollar reversed earlier losses on Monday to mark its strongest close against the greenback in about 1-1/2 weeks, as crude prices surged and investors positioned ahead of a busy week for economic data. The price of oil, a key Canadian export, soared for a third straight session, jumping 8.8 percent, propelled in part by a downward revision of U.S. crude production data. U.S. crude oil futures settled at $49.20 a barrel on Monday. Oil has sky-rocketed some 25 percent over the last three sessions. The Canadian dollar finished at C$1.3157 to the greenback, or 76.01 U.S. cents, softer than the Bank of Canada's official close of C$1.3215, or 75.67 U.S. cents on Friday. The currency traded broadly between C$1.3117 and C$1.3327 during the session. "It's a very crowded trade now," said Bipan Rai, director of foreign exchange strategy at CIBC World Markets. "A lot of investors were looking at these levels and noticing that there really isn't too much appetite for heavy follow-through beyond the highs we saw last week," he said, adding that month-end trading flows added to the moves. "So some measure of profit taking. ... We could be in for a consolidative period over the coming weeks." Rai said there was a good chance the loonie could test C$1.30 or even break below it, but did not expect trading to remain at those level on a sustained basis. On the data front, Canada's current account deficit narrowed slightly in the second quarter to C$17.40 billion, but was greater than the C$16.90 billion shortfall predicted by analysts. After a quiet period on the economic data front, investors are turning their attention to this week's Canadian data, including second-quarter growth data on Tuesday, trade balance figures for July on Thursday, and job numbers for August from both sides of the border on Friday. Canadian government bond prices were mostly lower across the maturity curve, with the two-year price down 4.5 Canadian cents to yield 0.441 percent and the benchmark 10-year slipping 47 Canadian cents to yield 1.492 percent. The Canada-U.S. two-year bond spread narrowed to -29.9 basis points, while the 10-year spread narrowed to -72.6 basis points. (Reporting by Solarina Ho; Editing by W Simon and Leslie Adler)
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