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CANADA FX DEBT-Canadian dollar rebounds from 5-week low as Wall Street rallies

 (Adds strategist quotes and details throughout; updates prices)
    * Loonie touches weakest intraday level since Dec. 23
    * Price of U.S. oil settles nearly 1% lower
    * Canadian bond yields rise across much of a steeper curve

    By Fergal Smith
    TORONTO, Jan 28 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Thursday, with the
currency recovering from an earlier five-week low as worries
receded that short squeezes by an army of retail investors would
threaten the financial system.
    The loonie        was trading nearly unchanged at 1.2797 to
the greenback, or 78.14 U.S. cents, having rebounded from its
weakest intraday level since Dec. 23 at 1.2881.
    The currency benefited from a recovery in risk appetite,
said Karl Schamotta, chief market strategist at Cambridge Global
Payments.
    "Risk appetite returned across asset classes this morning as
it became clear that the GameStop phenomenon does not represent
a systemic risk to the financial system," Schamotta said.
    Some online brokerages restricted trading in GameStop
        and stocks of several other social-media darlings that
had soared this week, while U.S. stocks rebounded from sharp
losses in the prior session as fears eased around hedge funds
selling long positions to cover shorts.                         
    "The episode has provided a useful illustration of the
vulnerabilities that are building in the background as
governments and central banks flood markets with money and
truncate financial volatility," said Schamotta.
    The unprecedented liquidity injected into the financial
system from the Bank of Canada's bond purchases has pushed some
money market rates below the central bank's targeted interest
rate, and analysts say the pressure will persist until the
quantitative easing program is scaled back.             
    The price of oil, one of Canada's major exports, eased as
the market focused on delays to vaccine rollouts and fresh
travel curbs that could depress demand.             
    U.S. crude oil futures        settled nearly 1% lower at
$52.34 a barrel, while Canadian government bond yields were
higher across much of a steeper curve in tandem with U.S.
Treasuries. The 10-year             rose 2.9 basis points to
0.823%.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Peter
Cooney)
  
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