Canada dollar rebounds as commodity prices rise
* Canadian dollar reclaims portion of recent losses
* Canadian dollar on track to end 3-session skid
* Bonds drop ahead of U.S. home sales data
By Frank Pingue
TORONTO, May 27 (Reuters) - The Canadian dollar rose against the U.S. dollar on Tuesday along with other commodity-linked currencies and higher oil prices, putting it on track to end a three-session retreat.
Domestic bond prices, with no Canadian economic data to consider, fell across the curve ahead of the U.S. new home sales data for April due out shortly.
At 9:20 a.m. (1320 GMT), the Canadian currency was at US$1.0086, valuing a U.S. dollar at 99.14 Canadian cents, up from US$1.0081, valuing a U.S. dollar at 99.20 Canadian cents, at Monday's close.
The bulk of the Canadian dollar's rise occurred during the overnight session, along with gains in the Australian and New Zealand dollars, all buoyed by lofty commodity prices. It rose as high as US$1.0133, valuing a U.S. dollar at 98.69 Canadian cents.
For now, oil prices firm above $130 a barrel, not far off last week's record high above $135 a barrel, outweighed some concerns about how higher fuel costs could hurt the global economy.
"The market is anticipating that the worst has sort of passed for the market in terms of the fallout and people's outlooks are a little bit more optimistic," said George Davis, chief technical strategist at RBC Capital Markets.
"And as a result of that the Canadian dollar has tended to benefit and the focus has moved back to commodities and crude oil in particular."
Prices for many of the commodities that Canada produces are sitting at high levels but are not having as positive an impact on the currency as they once had.
The domestic currency shot 17.5 percent higher last year versus the U.S. dollar due in large part to gains in the price of oil. But crude oil has soared almost 40 percent this year and the Canadian dollar is only up about 0.5 percent.
BOND PRICES LOWER
Canadian bond prices were all lower along with the bigger U.S. Treasury market as dealers positioned themselves ahead of the 10:00 a.m U.S. home sales report.
Max Clarke, an economist at IDEAglobal in New York, also said lofty commodity prices could be weighing on bond prices.
The key Canadian data for the week are not due until Friday when the first-quarter gross domestic product report is released.
The overnight Canadian LIBOR rate LIBOR01 was at 3.0400 percent.
Monday's CORRA rate CORRA= was 3.0101 percent, down from 3.0135 percent on Friday. The Bank of Canada publishes the previous session's rate at around 9 a.m. daily.
The two-year bond was down 7 Canadian cents at C$101.35 to yield 3.052 percent. The 10-year bond dropped 21 Canadian cents to C$102.52 to yield 3.668 percent.
The yield spread between the two- and 10-year bond was 61.6 basis points, down from 63.6 at the previous close.
The 30-year bond shed 19 Canadian cents to C$115.26 for a yield of 4.096 percent. In the United States, the 30-year Treasury yielded 4.640 percent.
The three-month when-issued T-bill yielded 2.74 percent, up from 2.67 percent at the previous close. (Editing by Bernadette Baum)
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