* Oil rally outweighs disappointing U.S. housing data
* Bonds mixed, market awaits Fed statement (Updates with details)
By Ka Yan Ng
TORONTO, June 23 (Reuters) - The Canadian dollar finished higher against the U.S. currency on Tuesday as rising oil prices and a recovery in equity markets helped it bounce off the five-week low it hit earlier in the day .
The price of oil, a key Canadian export, rallied to above $69 a barrel [ID:nSIN510304], after falling below $67, and the Canadian dollar largely tracked its movement.
Crude’s swing higher also lifted Toronto’s resource-heavy stock market index, [ID:N2379977] whose direction recently has frequently been a signal of where the Canadian dollar is headed.
The volatility in equity and oil markets through the session created a 120-basis point range for the currency, which moved between C$1.1463 and C$1.1583.
It finished higher at C$1.1500 to the U.S. dollar, or 86.96 U.S. cents, up from C$1.1526 to the U.S. dollar, or 86.76 U.S. cents, at Monday’s close.
“The commodity story did ultimately help to buoy the Canadian dollar,” said Eric Lascelles, chief economics and rates strategist at TD Securities.
At one point, shortly after U.S. data pointed to a sluggish recovery from the recession, the currency fell as low as C$1.1583 to the U.S. dollar, or 86.33 U.S. cents.
Numbers showed sales of previously owned homes in the United States rose at a slower than expected pace in May. [ID:nN23475172]
Even though the Canadian dollar finished moderately higher versus the greenback, it did not perform as well against its other Group of Seven currency pairs, such as against the yen.
“Canada has really underperformed. While we’re holding steady against the U.S., you’re seeing some further unwinding against the crosses,” said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
“So when the crosses are involved, it gets dragged around by the nose.”
Canadian bond prices were mixed with the short end lower, while the long end advanced cautiously as investors awaited the outcome of the two-day U.S. Federal Reserve policy meeting.
The U.S. housing data helped bonds cut early losses.
“Economic data today was a little bit mixed through and through. To me, when I sort through all the economic data today, I thought the news was a little bit positive overall,” Lascelles said.
“It’s the constant war between central bank expectations and supply concerns.”
The market will be watching to see the U.S. central bank’s economic outlook and further details on its debt buying program. A statement announcing the policy decision is expected at about 2:15 p.m. (1815 GMT) on Wednesday. [ID:nFEDAHEAD]
The benchmark two-year government bond dipped 3 Canadian cents to C$100.01 to yield 1.247 percent, while the 10-year bond fell 2 Canadian cents to C$102.63 to yield 3.435 percent.
The 30-year bond was up 35 Canadian cents at C$118.85 to yield 3.888 percent. The comparable U.S. issue yielded 4.372 percent.
Canadian bonds mostly underperformed U.S. Treasuries except in the three-year sector. The Canadian 30-year bond was 48.4 basis points below the U.S. 30-year yield, compared with about 53.2 basis points below on Friday. (Reporting by Ka Yan Ng; editing by Peter Galloway)