CANADA FX DEBT-C$ rises to a 4-week high as oil rallies
* Canadian dollar at C$1.3877 or 72.06 U.S. cents * Currency touches its strongest level since Jan. 4 at C$1.3838 * Bond prices lower across the maturity curve By Fergal Smith TORONTO, Feb 3 (Reuters) - The Canadian dollar rallied to a 4-week high against its U.S. counterpart on Wednesday as oil prices bounced and after the takeover of a major Canadian retailer was announced, while doubts about U.S. rates hikes weighed on the greenback. U.S. crude prices rose 3 percent after Russia reiterated its openness to talking with OPEC about output cuts. U.S. home improvement retailer Lowe's Companies Inc said it agreed to buy Canada's Rona Inc in a deal valued at C$3.2 billion ($2.28 billion). Dealers doubted that foreign exchange flows related to the deal had driven the Canadian dollar higher overnight. But expectation that flows might occur was supportive of the currency. "It could be market participants thinking that they might front run that (takeover related flows)," said Brad Schruder, director of foreign exchange at BMO Capital Markets. At 9:37 a.m. EST (1437 GMT), the Canadian dollar was trading at C$1.3877 to the greenback, or 72.06 U.S. cents, much stronger than the Bank of Canada's official close of C$1.4027, or 71.29 U.S. cents. The currency's touched its strongest level since Jan. 4 at C$1.3838, while its weakest level was C$1.4103. U.S. private employers added more jobs than expected in January. Nonetheless, the U.S. dollar weakened against a basket of major currencies amid doubts about how much the Federal Reserve can raise rates this year. Most automakers on Tuesday reported higher Canadian auto sales in January, even as forecasters expect demand for cars and light trucks to level off in Canada this year following a record-breaking 2015. Canadian government bond prices were lower across the maturity curve, with the two-year price down 5 Canadian cents to yield 0.399 percent and the benchmark 10-year falling 38 Canadian cents to yield 1.159 percent. The 10-year yield hit its lowest since Jan. 20 at 1.108 percent before rebounding. It followed a flight to safety which helped drive yields lower on Tuesday. The Bank of Canada will conduct a C$3.7 billion 2-year auction on behalf of the Government of Canada. The bidding deadline is 12:00 p.m. EST (1700 GMT). (Reporting by Fergal Smith; Editing by Nick Zieminski)
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