CANADA FX DEBT-C$ rebounds from 12-year low as oil, stocks advance

Tue Jan 12, 2016 9:18am EST
 
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* Canadian dollar at C$1.4184 or 70.50 U.S. cents
    * Currency hit a fresh 12-year low at C$1.4268 or 70.09 U.S.
cents
    * Bond prices mixed across the maturity curve

    TORONTO, Jan 12 (Reuters) - The Canadian dollar rebounded
from a fresh 12-year low against its U.S. counterpart on Tuesday
as crude oil prices rose, while firming in in U.S. and European
stocks added to the support for the risk-sensitive commodity
currency.        
    Crude oil recovered as investors booked profits after it
fell to a near-12-year low on concerns about oversupply and
fragile demand from China. 
    U.S. crude prices were up 1.43 percent to $31.86 a
barrel, while Brent crude added 1.65 percent to
$32.07.   
    China stepped up efforts to curb bets against its currency
and reassure skeptical investors, as its central bank set
another firm fix for the yuan backed by what dealers said was
aggressive yuan buying offshore. Last weak China
allowed its currency to weaken, fueling fears about its economy
and weighing on risk appetite.
    At 9:04 a.m. EST (1404 GMT), the Canadian dollar 
was trading at C$1.4184 to the greenback, or 70.50 U.S. cents,
stronger than the Bank of Canada's official close of C$1.4223,
or 70.31 U.S. cents.
    The currency's strongest level of the session was C$1.4177,
while it hit its weakest level since May 2003 at C$1.4268.    
    On Monday, a plunge in crude oil prices and evidence that
Canadian business sentiment has deteriorated added to pressure
on the Bank of Canada to take further action after having cut
interest rates twice in 2015.
    The central bank's next interest rate announcement is on Jan
20. The market has implied only a 30 percent probability of a
rate cut, but it has nearly fully discounted a rate cut by
mid-year.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down 1.5
Canadian cents to yield 0.396 percent and the benchmark 10-year
 rising 8 Canadian cents to yield 1.315 percent.
    The Canada-U.S. two-year bond spread was 2.2 basis points
more negative at -56.0 basis points, while the 10-year spread
was 3.4 basis points more negative at -86.8 basis points as
Canadian government bonds outperformed.    
    The domestic data calendar is empty. On Wednesday, the Bank
of Canada will conduct a C$3.5 billion 5-year auction on behalf
of the Government of Canada.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)