(Adds analyst comment, updates prices to close)
* Canadian dollar settles at C$1.3030, or 76.75 U.S. cents
* Bond prices lower across the maturity curve
By Alastair Sharp
TORONTO, July 12 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Tuesday, helped by
higher oil prices and improved global risk sentiment as
political tensions eased in Britain, Japan prepared more
stimulus, and U.S. stocks hit record highs.
The gains more than reversed Monday's weakness in the
loonie, as Canada's currency is colloquially known.
"It's based on an overall pickup in risk appetite," said
Scott Smith, senior market analyst at Cambridge Global Payments
in Toronto. "That has helped levitate equities, risk-correlated
assets, oil is up over 4 percent on the day, so that has been
one of the main drivers for the loonie."
The Canadian dollar CAD=D4 settled at C$1.3030 to the
greenback, or 76.75 U.S. cents, much stronger than the Bank of
Canada's official Monday close of C$1.3121, or 76.21 U.S. cents.
The currency's strongest level of the session was C$1.2982,
while its weakest level was C$1.3131.
Oil surged 5 percent, its biggest daily gain since April,
although some of that was attributed to investors covering short
positions as worries about a supply glut persisted. O/R
The Bank of Canada is likely to sound a dovish tone but hold
rates steady when it presents its quarterly monetary policy
report on Wednesday, pointing to global uncertainties like
Brexit and indebted consumers at home as economic risks.
Canadian government bond prices were lower across the
maturity curve, with the two-year CA2YT=RR price down 6.5
Canadian cents to yield 0.505 percent and the benchmark 10-year
CA10YT=RR slumping 72 Canadian cents to yield 1.057 percent.
That was the 10-year's highest yield this month.
The Canada-U.S. two-year bond spread was -18.4 basis points,
while the 10-year spread was -44.8 basis points.
The loonie was also stronger against the yen, which fell
broadly as a weekend election victory by Japan's ruling
coalition paved the way for more stimulus.
It also gained versus the euro and Swiss franc, but
underperformed sterling and the Australian and New Zealand
dollars.