CANADA FX DEBT-C$ rallies to nearly 8 week high against weaker greenback
* Canadian dollar at C$1.3680 or 73.10 U.S. cents * Currency touches its strongest since Dec. 11 at C$1.3640 * Bond prices higher across the maturity curve TORONTO, Feb 4 (Reuters) - The Canadian dollar rallied to a nearly 8 week high against its U.S. counterpart on Thursday as speculation the U.S. Federal Reserve will be sidelined this year weighed on the greenback, while crude oil prices firmed. The currency has rallied more than 7 percent since hitting on Jan. 20 its weakest since 2003 at C$1.4689, helped by expectations that the Bank of Canada will not cut rates in the near term. The U.S. dollar was back on the defensive after a collapse in expectations of a further rise in U.S. interest rates this year drove its biggest daily fall in over two months on Wednesday. Oil rose after the previous session's 7 percent jump. U.S. crude prices were up 1.64 percent to $32.81 a barrel, while Brent crude added 0.26 percent to $35.13. At 9:18 a.m. EST (1418 GMT), the Canadian dollar was trading at C$1.3680 to the greenback, or 73.10 U.S. cents, stronger than Wednesday's official close of C$1.3773, or 72.61 U.S. cents. The currency touched its strongest since Dec. 11 at C$1.3640, while its weakest level was C$1.3797. The number of Americans filing for unemployment benefits rose more than expected last week, suggesting some loss of momentum in the labor market amid a sharp economic slowdown and stock market selloff. The Conference Board of Canada downgraded its 2016 growth forecast for Canada to just 1.7 percent as the economy continues to suffer from the further deterioration in oil prices. Canadian government bond prices rose across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.393 percent and the benchmark 10-year rising 10 Canadian cents to yield 1.143 percent. On Wednesday, the 10-year yield hit a new record low at 1.084 percent as the market reappraised the Fed policy outlook. Canadian employment data for January and trade data for December are due on Friday, as are U.S. jobs data. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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