CANADA FX DEBT-C$ rebounds as oil, equities climb

Tue Apr 21, 2009 4:27pm EDT
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* C$ finishes at 80.89 U.S. cents

* Bank of Canada cuts rate 25 basis points to 0.25 pct

* Bond prices mixed (Adds details, quotes)

By Jennifer Kwan

TORONTO, April 21 (Reuters) - The Canadian dollar rose against the U.S. dollar on Tuesday as rising oil prices and stock markets lifted the currency from the three-week low it hit earlier in the day after the Bank of Canada cut its benchmark interest rate to 0.25 percent.

The Bank of Canada cut its key overnight rate 25 basis points to a historic low from 0.50 percent and predicted a deeper recession than it had previously forecast [ID:nN21297335].

It also surprised the market by saying it will keep its key overnight rate at 0.25 percent until mid 2010 in an aggressive bid to boost the economy.

"What caught the market a little bit off guard was the statement that rates could stay this low as far as June 2010," said Firas Askari, head of foreign exchange trading at BMO Capital Markets.

After the central bank's announcement at 9:00 a.m. (1300 GMT), the currency dropped to C$1.2507 to the U.S. dollar, or 79.96 U.S. cents, its lowest level since April 2. The weakness coincided with U.S. stock index futures that pointed to a lower open on equities markets.   Continued...