CANADA FX DEBT-C$ strengthens in commodity-linked rally

* Canadian dollar at C$1.2207, or 81.92 U.S. cents
    * Bond prices lower across the maturity curve

    By Alastair Sharp
    TORONTO, June 10 (Reuters) - The Canadian dollar
strengthened further against its U.S. counterpart on Wednesday,
boosted by a rise on oil prices as volatility in currency
markets favored the commodity-linked loonie.
    Also putting pressure on the greenback, the Japanese yen
soared after the country's central bank chief called it "very
weak." The Canadian and Australian dollars both gained 1 percent
against the U.S. currency on oil gains. 
    Crude rose after a report of falling U.S. inventories and
signs that U.S. oil production growth was leveling off after
several years of very sharp increases. 
    "It's creating an environment whereby currencies, most
noticeably commodity-bloc currencies, are gaining quite
substantially," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
    The Canadian dollar was at C$1.2207 to the
greenback, or 81.92 U.S. cents, by mid-morning, stronger than
Tuesday's close of C$1.2346, or 81.00 U.S. cents.
    At one point almost touching C$1.22, the loonie was at its
strongest level since May 22.
    Spitz said that with stops below C$1.23 triggered, a move
toward the late-May low of C$1.2175 or even to C$1.20 was
    "It may be short-lived," he said. "It's really going to
depend on whether or not crude pricing, or commodity pricing in
general, maintains some momentum to its current bid."
    Canadian government bond prices were weaker across the
maturity curve, with the two-year down 2 Canadian
cents to yield 0.675 percent and the benchmark 10-year
 down 15 Canadian cents to yield 1.897 percent.

 (Editing by Lisa Von Ahn)