CANADA FX DEBT-C$ makes modest gains as oil extends rebound

Thu Dec 18, 2014 10:05am EST
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* Canadian dollar at C$1.1619 or 86.07 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Dec 18 (Reuters) - The Canadian dollar was firmer
against the U.S. dollar on Thursday as market appetite for
riskier assets returned and crude prices continued to rebound
from 5-1/2 year lows.
    An upbeat assessment of the U.S. economy from the Federal
Reserve on Wednesday and a signal that it would move to tighten
policy as it has planned helped to buoy equity markets as well
as commodities-linked currencies such as the Canadian dollar.
    "It's getting some strength from general risky assets doing
better," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets, noting that stronger
oil prices were also providing support.
    Crude prices rose as a number of oil companies moved to put
plans for new production on hold and to cut spending. The loonie
has been especially sensitive to plunging oil prices as Canada
is a major oil exporter.   
    At 9:30 a.m. EST (1430 GMT), the Canadian dollar 
was at C$1.1619 to the greenback, or 86.07 U.S. cents, stronger
than Wednesday's close of C$1.1639, or 85.92 U.S. cents.
    Investor attention will shift on Friday to a slew of
domestic economic data, including inflation and retail sales.
    "The test for Canada will be if we get soft data at the same
time the U.S. data ... remains strong. Then it's going to put
the divergence between the two central banks in a bit of a
spotlight," Chandler said.
    The Bank of Canada has been more cautious about an economic
rebound than the Fed and analysts say it seems highly unlikely
it will hike interest rates until sometime after the Fed makes
its first rate move.
    Canadian government bond prices were mixed across the
maturity curve, but the longer term securities were generally
weaker. The two-year bond gave back 3 Canadian cents
to yield 1.015 percent, while the benchmark 10-year bond
 retreated 35 Canadian cents to yield 1.851 percent.

 (Editing by Peter Galloway)