CANADA FX DEBT-C$ firms as oil prices rally, trade concerns ease

    * Canadian dollar at C$1.3656, or 73.27 U.S. cents
    * Bond prices mixed across the yield curve

    By Solarina Ho
    TORONTO, May 10 (Reuters) - The Canadian dollar strengthened
on Wednesday against the U.S. dollar as oil prices rallied
following a drop in U.S. inventories and after more countries
supported an extension to OPEC supply cuts.
    At 4:00 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.3656 to the greenback, or 73.23 U.S. cents, up
0.5 percent, according to Reuters data. 
    The currency traded in a range between C$1.3648 and
    Prices of oil, one of Canada's major exports, rose after
U.S. crude inventories made the biggest one-week drop this year.
Iran and Algeria also joined Saudi Arabia in supporting an
extension to OPEC supply cuts.
    U.S. crude        prices were up 3.23 percent to $47.36 a
    "What's good for oil good is for the loonie. We've seen the
loonie move in tandem and regain a little bit of lost ground,"
said Rahim Madhavji, President at
    While the Canadian dollar, commonly known as the "loonie",
could strengthen in the short term, Madhavji said the U.S.
dollar is expected to grind higher.
    "I still think the story for the loonie is not a good one as
we head into the middle and latter half of the year."
    Comments by U.S. Commerce Secretary Wilbur Ross in a Reuters
interview also helped the currency. Ross said the Trump
administration would try to use existing tools to enforce trade
rules, rather than adopt the slash-and-burn approach discussed
on the campaign trail in 2016.             
    The greenback        recovered from earlier losses against a
basket of major currencies as the impact of FBI Director James
Comey's abrupt firing dissipated for the time being.
    The loonie had hit a 14-month low on Friday at C$1.3793.
Lower commodity prices, concerns about a possible North American
Free Trade Agreement renegotiation and investor wariness about
how troubles at alternative lender Home Capital Group Inc
         could affect Canada's real estate market, put the
currency under recent pressure.
    Home Capital published data on Wednesday showing depositors
were continuing to withdraw funds but at a slower rate than
    The Liberal Party squeaked to victory in British Columbia
elections, but it lost its majority after 16 years in power
which left the future of big oil and gas projects in the region
    Canadian government bond prices were mixed across the yield
curve. The two-year            edged up half a Canadian cent to
yield 0.719 percent and the 10-year             slipped 14
Canadian cents to yield 1.637 percent.

 (Reporting by Solarina Ho and Fergal Smith; editing by Grant