CANADA FX DEBT-C$ turns higher alongside oil price
* C$ rises to C$1.0964 per US$, or 91.21 U.S. cents
* Canadian consumer prices fall in July
* Bond prices flat across curve (Recasts)
By Frank Pingue
TORONTO, Aug 19 (Reuters) - Canada's dollar erased an early slide and rose against the greenback on Wednesday, tracking a rebound in equity markets and the backdrop of firm commodity prices for key Canadian exports.
The turnaround in the currency is attributed to oil prices, which reversed early losses and moved back towards $71 a barrel after data showed oil demand could be recovering in the United States. [ID:nSIN507010]
That also sparked a big rebound in North American equities, which managed to erase early losses and remained comfortably higher after midday.
"It's just going in tandem with everything," David Bradley, director of foreign exchange trading at Scotia Capital said of the Canadian dollar's turnaround. "And a lot of the move lower in (the U.S. dollar) is just short term guys exiting as the market turns."
At 12:55 p.m. (1655 GMT), the Canadian unit was at C$1.0964 to the U.S. dollar, or 91.21 U.S. cents, up from C$1.1018 to the U.S. dollar, or 90.76 U.S. cents, at Tuesday's close.
Data released earlier in the session showed consumer prices in Canada fell at the steepest rate in 56 years in the 12 months through July. [ID:nN19463312]
However, the report did not influence the currency because it was largely in line with forecasts and did not change market expectations of Bank of Canada policy action.
The Canadian dollar spent much of the Wednesday session in a wide range of C$1.1114 to the U.S. dollar, or 89.97 U.S. cents, and C$1.0954 to the U.S. dollar, or 91.29 U.S. cents.
"There's still a lot of people away in the summer so this volatility is exaggerated just because liquidity is a little bit thinner than it normally is," said Bradley.
BOND PRICES FLAT
Canadian bond prices CABONDT were flat to slightly higher across the curve, mirroring a move in the bigger U.S. Treasury market after a selloff in Chinese stock markets overnight ramped up demand for more secure government debt.
The two-year Canadian bond was up 4 Canadian cents at C$99.46 to yield 1.270 percent, while the 10-year bond rose 5 Canadian cents to C$102.75 to yield 3.416 percent.
The 30-year bond was flat at C$118.50 to yield 3.903.
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