CANADA FX DEBT-C$ strengthens as oil climbs above $50 a barrel

Tue Jun 7, 2016 9:32am EDT
 
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* Canadian dollar at C$1.2786, or 78.21 U.S. cents
    * Loonie hit its strongest since May 4 at C$1.2760
    * Bond prices mixed across the maturity curve

    TORONTO, June 7 (Reuters) - The Canadian dollar strengthened
to a one-month high against its U.S. counterpart on Tuesday as
oil prices climbed above $50 a barrel and after bets for U.S.
interest rate hikes were lowered following disappointing U.S.
jobs data last week.
    The loonie's gains came after Federal Reserve Chair Janet
Yellen on Monday called the latest U.S. jobs numbers
disappointing and opted not to repeat her recent message that
rates could rise again in the coming months. 
    Oil prices reached their highest in eight months, buoyed by
recent weakening in the U.S. dollar and by falling Nigerian oil
output after a spate of attacks on infrastructure. U.S. crude
 prices were up 0.97 percent at $50.17 a barrel. 
    At 9:15 a.m. EDT (1315 GMT), the Canadian dollar 
was trading at C$1.2786 to the greenback, or 78.21 U.S. cents,
stronger than Monday's official close of C$1.2807, or 78.08 U.S.
cents.
    The currency's weakest level of the session was C$1.2838,
while it touched its strongest since May 4 at C$1.2760.
    Canadian dollar-implied volatility, which traders use to
price options on the currency, fell further since Friday's U.S.
jobs data. For three-month options, implied volatility was at
9.1 percent, its lowest since January. Just one month ago, it
was at 11.5 percent. 
    In domestic data, the Ivey Purchasing Managers Index for May
will be released at 10:00 a.m. EDT (1400 GMT). It is expected to
weaken to 51.5 in from 53.1 in April, according to a Reuters
poll.
    Canadian employment data for May will be released at the end
of the week. The report comes after a wildfire last month cut
production in Alberta's oil sands region.
    The Bank of Canada has said it expects damage from the
wildfires to shave 1.25 percentage points off economic growth in
the second quarter. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up 1.5
Canadian cents to yield 0.54 percent and the benchmark 10-year
 rising 8 Canadian cents to yield 1.23 percent.
    Still, the 10-year yield has rebounded from its lowest in
nearly two months on Friday at 1.175 percent.    

 (Reporting by Fergal Smith; Editing by Bernadette Baum)