January 3, 2018 / 9:48 PM / 15 days ago

CANADA FX DEBT-C$ slips from 2-1/2-month high as greenback rallies

 (Adds analyst quotes and details on market activity, updates
prices)
    * Canadian dollar at C$1.2537, or 79.76 U.S. cents
    * Loonie touches its strongest since Oct 20 at C$1.2499
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, Jan 3 (Reuters) - The Canadian dollar dipped
against its U.S. counterpart on Wednesday but held within reach
of an earlier 2-1/2-month high as oil prices climbed and
investors turned attention to U.S. and Canadian employment data
scheduled for later in the week.
    At 4 p.m. (2100 GMT), the Canadian dollar          was
trading at C$1.2537 to the greenback, or 79.76 U.S. cents, down
0.2 percent.
    "I think we have seen some bargain hunting in terms of the
U.S. dollar today," said Shaun Osborne, chief currency
strategist at Scotiabank.
    The U.S. dollar        rallied on upbeat U.S. manufacturing
and construction data and after minutes from the Federal
Reserve's last policy meeting showed the central bank remained
on track to raise interest rates several times this year.
                
    The loonie touched its strongest intraday level since Oct.
20 at C$1.2499. It has been boosted over the past couple of
weeks by firm domestic data and a 2-1/2-year high for the price
of oil, one of Canada's major exports.
    U.S. crude oil futures        settled 2.1 percent higher at
$61.63 a barrel, helped by a sixth day of unrest in OPEC member
Iran and strong economic data from the United States and
Germany.                 
    Gains for oil could limit further pullback in the Canadian
dollar ahead of the U.S. and Canadian jobs reports, Osborne
said.
    Canada's employment report for December and November trade
data are due on Friday, which could help guide expectations for
additional Bank of Canada interest rate hikes this year.
    The central bank raised its benchmark interest rate for the
first time in seven years in July and then again in September,
to leave it at 1 percent. Money markets expect three further
rate hikes in 2018.               
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 4 Canadian cents to yield
1.681 percent and the 10-year             rising 23 Canadian
cents to yield 2.053 percent.
    On Tuesday, the 10-year yield touched its highest point in
more than two months at 2.093 percent.   

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Peter Cooney)
  
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