CANADA FX DEBT-Canadian dollar hits 90 US cents, pares gains

* C$ breaches 90 U.S. cent level before paring gains

* Currency shrugs off projected biggest ever deficit

* Bonds little changed, focus on U.S. Treasury auction

TORONTO, May 27 (Reuters) - The Canadian dollar touched its highest level against the U.S. currency in more than seven months on Wednesday, supported by positive signs of a recovering global economy and the rising price of oil.

The currency briefly moved above the 90 U.S. cent level before quickly paring gains.

But overall leaning was bullish for the Canadian unit “given the positive sentiment in the market and the view that the global economy is turning the corner,” said Sal Guatieri, senior economist at BMO Capital Markets.

“Commodity prices are also moving up, oil in particular, and that’s always a plus.”

The price of oil, a key Canadian export, rose to a six-month high after OPEC’s biggest member Saudi Arabia said the global economy had strengthened enough to cope with oil at $75-$80 a barrel. [ID:nSYD212068]

At 8:15 a.m. (1215 GMT), the Canadian unit was at C$1.1177 to the U.S. dollar, or 89.47 U.S. cents, up from C$1.1178 to the U.S. dollar, or 89.46 U.S. cents, at Tuesday’s close when it was spurred by a rise in oil prices and by upbeat U.S. economic data that whetted investor appetite for risk.

The consumer confidence data was the latest of several reports in the past few weeks to signal an improving U.S. economy and to weigh on the safe-haven status of the greenback, allowing the Canadian dollar to rally from the four-year low it hit in early March.

The unit was not rattled by Finance Minister Jim Flaherty’s comments late on Tuesday when he said Canada will run a deficit of more than C$50 billion, its biggest ever, in the current fiscal year. [ID:nN26501199]

“It’s a big number but a smaller number compared to other countries. The markets generally have shrugged off the ballooning of our deficit,” said Guatieri.

“The markets are optimistic that once the economy recovers the deficit will come down pretty sharply,” he said.

Meanwhile Canadian bonds were little changed as the focus rested on the U.S. Treasury $35 billion five-year note auction later in the session.

The benchmark two-year government bond dipped 2 Canadian cents to C$100.05 to yield 1.224 percent, while the 10-year bond slipped 10 Canadian cents to C$102.75 to yield 3.423 percent.

The 30-year bond was up 5 Canadian cents at C$115.30 to yield 4.079 percent. (Reporting by Ka Yan Ng; Editing by Theodore d’Afflisio)