CANADA FX DEBT-C$ strengthens as oil rallies

Thu May 5, 2016 9:44am EDT
 
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* Canadian dollar at C$1.2810, or 78.06 U.S. cents
    * Bond prices mixed across the maturity curve

    TORONTO, May 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Thursday as oil rallied and
stocks rose, while investors turned attention to upcoming jobs
data in the U.S. and Canada.
    The strengthening of the loonie comes one day after it
plunged to a two-week low of C$1.2886, pressured by weak
domestic trade data and a wildfire that cut production in
Canada's oil sands region.        
    Supportive of the risk-sensitive commodity-linked currency,
U.S. and Canadian stocks opened higher, while oil
rallied. 
    U.S. crude prices were up 4.34 percent to $45.68 a
barrel as Canadian production cuts and escalating tensions in
Libya stoked concern among investors over a near-term supply
shortage. 
    At 9:30 a.m. EDT (1330 GMT), the Canadian dollar 
was trading at C$1.2810 to the greenback, or 78.06 U.S. cents,
stronger than Wednesday's close of C$1.2870, or 77.70 U.S.
cents.
    The currency's strongest level of the session was C$1.2787,
while its weakest was C$1.2874.
    The loonie has rallied more than 14 percent since hitting a
12-year low of C$1.4689 in January. However, analysts expect the
currency will not be able to hold on to all of those gains.
 
    Weaker-than-expected trade data on Wednesday has weighed on
Canada's growth outlook. BMO Capital Markets has cut its
estimate for first quarter growth to 2.9 percent annualized,
from 3.3 percent previously, and its projection for second
quarter growth to 1.3 percent from 1.5 percent, according to a
research note Thursday morning, while economists expect oil
production cuts to weigh on May gross domestic product.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down 0.5
Canadian cent to yield 0.581 percent and the benchmark 10-year
 rising 10 Canadian cents to yield 1.393 percent, its
lowest since April 20.
    Canada's April employment report is due on Friday, expected
to reveal no change in employment after a strong gain in the
previous month.  

 (Reporting by Fergal Smith; Editing by Nick Zieminski)