CANADA FX DEBT-C$ strengthens to 2-week high as oil rallies
* Canadian dollar at C$1.2912, or 77.45 U.S. cents * Bond prices lower across the maturity curve TORONTO, June 6 (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Monday as oil prices rose and investors turned their attention to a speech by U.S. Federal Reserve Chair Janet Yellen. U.S. crude prices were up 2.06 percent at $49.62 a barrel, lifted by a plunge in the greenback on Friday that could spur demand just as attacks on Nigerian oil infrastructure tighten supplies. Canadian dollar-implied volatility, which traders use to price options on the currency, has dropped after much weaker-than-expected U.S. employment data on Friday lowered the chances of a Fed rate hike. For three-month options, implied volatility was at 9.2 percent on Monday, its lowest since January. Still, when Fed Chair Yellen speaks on Monday, she will probably keep the door open to an interest rate hike within the next few months. At 9:12 a.m. EDT (1312 GMT), the Canadian dollar was trading at C$1.2912 to the greenback, or 77.45 U.S. cents, stronger than Friday's close of C$1.2943, or 77.26 U.S. cents. The currency's weakest level of the session was C$1.2981, while it touched its strongest since May 18 at C$1.2909. Speculators have raised bullish bets on the Canadian dollar, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions rose to 26,259 contracts in the week ended May 31 from 20,047 in the prior week. Canadian employment data for May is awaited at the end of the week. It may show "the first taste of wildfire-driven volatility," said a research note on Monday from BMO Capital Markets. The Bank of Canada has said it expects damage from the wildfires in Alberta to shave 1.25 percentage points off economic growth in the second quarter. Canadian government bond prices were lower across the maturity curve, with the two-year down 2.5 Canadian cents to yield 0.521 percent and the benchmark 10-year falling 30 Canadian cents to yield 1.21 percent. On Friday, the 10-year yield hit its lowest in nearly two months at 1.175 percent. Governments and central banks need a certain amount of coordination so they can discuss policies and consider the implications on debt levels and financial stability over the medium term, Bank of Canada Governor Stephen Poloz said on Saturday. (Reporting by Fergal Smith; Editing by Lisa Von Ahn)
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