By Frank Pingue
TORONTO, March 5 (Reuters) - The Canadian dollar was higher versus the U.S. dollar on Wednesday as oil prices rebounded and the recent rally in the greenback lost steam.
Domestic bond prices, with no Canadian economic data to consider, followed the bigger U.S. Treasury market higher while Tuesday's dovish statement from the Bank of Canada also helped support the move.
At 9:30 a.m. (1430 GMT), the Canadian dollar was at US$1.0104, valuing a U.S. dollar at 98.97 Canadian cents, up from US$1.0049, valuing a U.S. dollar at 99.51 Canadian cents, at Tuesday's session close.
The move put the currency on pace to end a three-session losing skid that sent it to a one-week low on Tuesday after the Bank of Canada lowered interest rates and left the door wide open to more cuts in the future.
"We did see a lot of stop loss buying on the way up in (the U.S. dollar) since Friday and I think a lot of those stops have now been cleared out," said George Davis, chief technical strategist at RBC Capital Markets.
"Now that a lot of those stops are taken out I think that the market is a little bit overextended to the top side so what we are seeing is more of a trading pullback than anything else (for the U.S. dollar)."
The Canadian dollar rose nearly 3 percent last week, but it slipped on Friday and during the first two sessions this week as investors digested data that showed the economy slowed in the fourth quarter.
Davis suggested the commodity-linked Canadian dollar was drawing support from oil prices, which steadied above $100 a barrel. The price for gold, another key Canadian export along with oil, also moved higher.
The Bank of Canada cut its key rate by 50 basis points to 3.50 percent, its biggest cut since 2001. That was in line with the majority of expectations of primary dealers in a Reuters poll taken on Friday.
Canadian bond prices took their cue from the bigger U.S. Treasury market and moved higher as data south of the border showed growing risks of a recession.
With a bare Canadian economic calendar, investors turned their attention to a ADP National Employment Report that showed a surprise shrinkage in private U.S. payrolls in February.
The domestic economic calendar will pick up on Thursday with the release of January building permits data and the February Ivey Purchasing Managers Index.
Also helping to prop up domestic bond prices was the Bank of Canada statement on Tuesday that emphasized downside risks to Canada's economy due to the U.S. economic downturn, which it said was likely to be more prolonged than it had projected in January.
The overnight Canadian Libor rate LIBOR01 was 3.6466 percent, down from 3.7433 percent on Tuesday.
Tuesday's CORRA rate CORRA= was 3.5104 percent, down from 4.0107 on Monday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond was up 8 Canadian cents at C$102.71 to yield 2.637 percent. The 10-year bond rose 29 Canadian cents to C$103.09 to yield 3.602 percent.
The yield spread between the two- and 10-year bond was 96.5 basis points, up from 94.5 points at the previous close.
The 30-year bond increased 34 Canadian cents to C$115.32 to yield 4.096 percent. In the United States, the 30-year Treasury yielded 4.494 percent.
The three-month when-issued T-bill yielded 2.87 percent, down from 2.90 percent at the previous close. (Editing by Renato Andrade)