CANADA FX DEBT-C$ strengthens to 2-1/2-month high as oil rallies
* Canadian dollar at C$1.3516 or 73.99 U.S. cents * Currency touched its highest since Dec. 8 at C$1.3505 * Bond prices lower across the maturity curve TORONTO, Feb 26 (Reuters) - The Canadian dollar strengthened on Friday to a 2-1/2-month high against its U.S. counterpart as crude oil prices and global stocks rallied. Crude oil prices rose as strong U.S. gasoline demand and hopes of OPEC action outweighed concerns over fundamental oversupply. U.S. crude prices were up 4.11 percent to $34.43 a barrel. Adding to support for the risk-sensitive commodity currency, stock markets inched higher for the third day in five as G20 policymakers meeting in Shanghai sought to find common ground on how to reboot a struggling global economy. While the U.S. dollar softened against the loonie, the greenback rose against a basket of major currencies, helped by an upward revision to U.S. fourth quarter growth. At 9:27 a.m. EST (1427 GMT), the Canadian dollar was trading at C$1.3516 to the greenback, or 73.99 U.S. cents, stronger than Thursday's official close of C$1.3541, or 73.85 U.S. cents. The currency's touched its strongest level since Dec. 8 at C$1.3505, while its weakest was C$1.3564. It has extended recovery from a 12-year low of C$1.4689 in January, helped by stabilization in crude oil prices and the shifting of the fiscal stimulus burden from the Bank of Canada to the Canadian government. On Monday, Finance Minister Bill Morneau said the government will push ahead with plans to invest in infrastructure projects. Adding private-sector spending to projects could spur even greater spending and limit the need for a Bank of Canada rate cut. The implied probability of a Bank of Canada rate cut by mid-year has dropped to 37 percent from around 60 percent at the start of the week. Canadian government bond prices were lower across the maturity curve on reduced demand for safe haven assets. The two-year price fell 3 Canadian cents to yield 0.509 percent and the benchmark 10-year was down 48 Canadian cents to yield 1.195 percent. The curve steepened in sympathy with U.S. Treasuries, as the spread between the 2-year and 10-year yields widened by 3.7 basis points to 68.6 basis points, indicating underperformance for longer-dated maturities. (Reporting by Fergal Smith Editing by W Simon)
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