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* C$ hits 77.07 U.S. cents before rebounding
* Bonds mostly higher, adjusting to Bank of Canada news
* Bank of Canada cuts overnight rate to 0.5 percent
* BoC may take extra steps to pump money into system (Updates to close)
By Ka Yan Ng
TORONTO, March 3 (Reuters) - The Canadian dollar fought back on higher oil prices to finish nearly unchanged on Tuesday after hitting a three-month low in the morning after the Bank of Canada cut interest rates to a record low.
The currency swung in a wide range, between C$1.2808 to the U.S. dollar, in the overnight session to a three-month low at C$1.2976 to the U.S. dollar at midmorning.
The Canadian dollar CAD= closed at C$1.2911 to the U.S. dollar, or 77.45 U.S. cents, compared with C$1.2914 to the U.S. dollar, or 77.44 U.S. cents, at Monday's close.
The Canadian dollar recovered as the price of oil edged higher above $41 a barrel. It often tracks the price of oil CLc1, a key Canadian export.
"You're getting buffeted by concern about the U.S. recovery ...however with oil prices rising over the course of the day, that's been an offset. The Canadian dollar has had a hard time finding direction," said Paul Ferley, assistant chief economist, at Royal Bank of Canada.
The currency lost early gains against its U.S. counterpart after the Bank of Canada cut its key overnight rate by half a percentage point to 0.5 percent and said for the first time that it may turn to unorthodox measures to further stimulate the economy. [ID:nN03241]
Measures such as buying assets in the market to expand the money supply may be among options the central bank is considering. It pledged to unveil a detailed framework in April.
"You've got a whole gamut of things coming out of this policy statement to suggest that rates are going to remain low in Canada for a considerable amount of time," said Stewart Hall, an economist at HSBC Canada.
The currency rallied ahead of the rate announcement as the U.S. dollar -- which has been a safe haven choice -- weakened on dulling risk aversion and after the Reserve Bank of Australia unexpectedly left interest rates on hold.
The Australian dollar, a fellow commodity-linked currency, was one of the top performing currencies on Tuesday.
Canadian bond prices were mostly higher across the curve as they adjusted to the Bank of Canada's rate cut announcement.
Only the 30-year bond was in negative territory, in line with its U.S. counterpart, a day after a massive rally brought on by sharp losses on the equity markets.
The interest-rate sensitive two-year bond extended the previous session's gains, rising 13 Canadian cents to C$103.07 to yield 0.970 percent. The 10-year bond climbed 18 Canadian cents to C$106.76 to yield 2.978 percent.
The 30-year bond lost 42 Canadian cents to C$124.05 to yield 3.631 percent.
The Bank of Canada's statement on Tuesday prompted at least one bank to revise its forecast for rate cuts after the central bank said it would consider taking extra steps to pump money into the system.
TD Securities now forecasts the Bank of Canada will cut its overnight rate by another 25 basis points to take it to a record low at 0.25 percent. TD also gives a greater than 50-percent probability that the central bank will opt for some less conventional ways of pumping money into the economy after the April 21 rate decision. (Editing by Peter Galloway)