CANADA FX DEBT-C$ stronger as oil prices jump on supply deal hopes

(Adds trader comment, updates prices to close)
    * Canadian dollar settles at C$1.4075, or 71.05 U.S. cents
    * Bond prices lower across the maturity curve

    By Alastair Sharp
    TORONTO, Jan 26 (Reuters) - The Canadian dollar rallied
against its U.S. counterpart on Tuesday, its fourth strong gain
in five sessions, supported by a recovery in oil prices on hopes
a deal could be reached to address a global crude supply glut.
    The loonie, as the Canadian currency is colloquially known,
last week hit its weakest level since 2003, but has gained since
Wednesday's decision by the Bank of Canada to hold off on
cutting rates and as oil prices push back above $30 a barrel.
    "We're taking our cues from commodity prices," said Don
Mikolich, executive director of foreign exchange sales at CIBC
Capital Markets.
    Crude surged after the Organization of the Petroleum
Exporting Countries (OPEC) renewed calls for rival producers to
cut supply alongside its members, but Russia, seen as key to any
deal, has resisted so far. 
    Mikolich said that the currency could struggle to push below
C$1.40 but that stronger signs that oil supply will be curtailed
could help the loonie strengthen as far as C$1.35.
    The Canadian dollar settled at C$1.4075 to the
greenback, or 71.05 U.S. cents, at the stronger end of its
C$1.4045 to C$1.4326 range in the session, and stronger than
Monday's official close of C$1.4270, or 70.08 U.S. cents.
    U.S. Federal Reserve policymakers meet on Tuesday and
Wednesday for the first time since raising interest rates in
December. While no move is expected, investors will parse their
statement to see how recent events have influenced the central
bank's outlook. 
    Canadian government bond prices were lower across the
maturity curve as the rise in crude oil prices supported the
domestic economic outlook.
    The two-year price was down 5.5 Canadian cents to
yield 0.435 percent and the benchmark 10-year fell
23 Canadian cents to yield 1.269 percent.
    The Canada-U.S. 10-year bond spread was 4.8 basis points
less negative at -72.9 basis points as Canadian government bonds
    Canadian gross domestic product for November is awaited on
Friday, expected to reveal a rebound in growth after contraction
in October. 

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Sandra Maler)