CANADA FX DEBT-C$ stabilizes for a second day as oil rises
* Canadian dollar at C$1.3151, or 76.04 U.S. cents * Bond prices higher across flatter maturity curve TORONTO, Aug 9 (Reuters) - The commodity-linked Canadian dollar traded in a narrow range for a second straight day against its U.S. counterpart on Tuesday as higher oil prices offset recent weak domestic data. Oil rose as forecasts for a drop in U.S. inventories and speculation of producer action to prop up prices countered concern about a supply glut. U.S. crude prices were up 0.60 percent to $43.28 a barrel. The Canadian dollar's more stable performance follows steep losses on Friday as a slump in domestic jobs and a record-wide trade deficit contrasted with a robust U.S. jobs report. The implied probability of a Bank of Canada rate cut has increased to 19 percent, overnight index swaps data showed, from just 12 percent before Friday's weak domestic data. However, technical support for the Canadian dollar at C$1.3219 may continue to limit losses for the currency over the short term as oil is poised to extend gains toward $44.65, according to a research note from RBC Capital Markets on Tuesday. At 9:26 a.m. EDT (1326 GMT), the Canadian dollar was trading at C$1.3151 to the greenback, or 76.04 U.S. cents, slightly stronger than Monday's close of C$1.3163, or 75.97 U.S. cents. The currency's strongest level of the session was C$1.3145, while its weakest was C$1.3190. Canadian housing starts fell in July from June, as construction of multiple units - typically condos - fell 13.3 percent after an unexpectedly large gain in June, data from the national housing agency showed on Tuesday. Canadian government bond prices were higher across a flatter maturity curve. The two-year bond rose 0.5 Canadian cent to yield 0.508 percent and the benchmark 10-year climbed 26 Canadian cents to yield 1.038 percent. The yield on Canada's 10-year bond fell 1.8 basis points farther below the yield on its U.S. equivalent, leaving the spread at -53.8 basis points, its largest gap since June 2, as Canadian government bonds outperformed. (Reporting by Fergal Smith; Editing by Bill Trott)
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