CANADA FX DEBT-C$ weakens ahead of Bank of Canada rate decision on Wednesday

Mon Mar 7, 2016 10:11am EST
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* Canadian dollar at C$1.3348, or 74.92 U.S. cents
    * Bond prices lower across the maturity curve

    TORONTO, March 7 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday, but held near
three-month highs as oil prices rose and ahead of a Bank of
Canada monetary policy decision on Wednesday.
    The currency has rebounded roughly 10 percent since hitting
a 12-year low in January at C$1.4689.
    The rally has likely caught the Bank of Canada's attention,
according to a research note this morning from RBC Capital
    An excessively quick strengthening of the currency could
hinder a pick-up in exports that appears to be underway.
    Data on Friday showed exports rose for a third consecutive
    That provided "more confidence that the rotation of growth
to exports from consumption and housing is taking root," BMO
Capital Markets said in a research note on Monday.
    The unwinding of bearish bets by speculators has added to
support for the currency.
    Net short Canadian dollar positions decreased to 30,478
contracts in the week ended March 1 from 36,940 the prior week,
Commodity Futures Trading Commission data showed on Friday. It
reached a five-month high in January.    
    U.S. crude prices were up 2.06 percent to $36.66 a
    At 9:47 a.m. EST (1447 GMT), the Canadian dollar 
was trading at C$1.3348 to the greenback, or 74.92 U.S. cents,
weaker than Friday's close of C$1.3324, or 75.05 U.S. cents.
    The currency's strongest level of the session was C$1.3320,
while its weakest was C$1.3377.
    On Friday, it touched its strongest since Dec. 3 at
    The Bank of Canada is expected to hold interest rates at
0.50 percent as it waits to see what the impact of the
government's expected spending measures will have on the
economy. The measures will be presented at the March 22 budget.
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 2.5
Canadian cents to yield 0.537 percent and the benchmark 10-year
 falling 22 Canadian cents to yield 1.275 percent.
    The 10-year yield has rebounded from a record low of 0.92
percent on Feb. 11.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)