CANADA FX DEBT-C$ rallies after touching six-week low

Wed Jan 21, 2009 4:41pm EST
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* C$ gains on higher oil, greenback weakness

* Government bonds lower as TSX closes up 3 pct

By Jennifer Kwan

TORONTO, Jan 21 (Reuters) - The Canadian dollar rallied off a six-week low against the U.S. currency on Tuesday, boosted by a rise in the price of oil and as investors returned to riskier assets.

Canadian government bond prices followed the U.S. Treasury market lower as North American stock markets rallied, reversing steep losses in the previous session.

The currency finished at C$1.2558 to the U.S. dollar, or 79.63 U.S. cents, up from C$1.2676 to the U.S. dollar, or 78.89 U.S. cents, on Tuesday.

Earlier, the currency touched a low of C$1.2765 to the U.S. dollar, or 78.34 U.S. cents, its lowest level since Dec. 5.

The rise in the Canadian unit comes as the currency has recently been pressured by firmness in the U.S. dollar, said Sal Guatieri, senior economist at BMO Capital Markets.

"It's essentially a reversal of risk-aversion trades," said Guatieri.   Continued...