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CANADA FX DEBT-Loonie notches 3-month high as BoC scales back crisis operations

Fergal Smith

(Updates prices and details on productivity data) * Canadian dollar rises 0.2% against the greenback * Loonie touches a near 3-month high intraday at 1.3476 * Bank of Canada holds policy rate at 0.25% * Canadian bond yields rise across a steeper curve By Fergal Smith TORONTO, June 3 (Reuters) - The Canadian dollar strengthened to a three-month high against its U.S. counterpart on Wednesday as investors bet on economic recovery and the Bank of Canada reduced the frequency of some emergency operations it introduced to support financial markets. The central bank held its key overnight interest rate steady at a record low of 0.25% and said the impact of the coronavirus pandemic on the global economy appeared to have peaked and the Canadian economy seemed to have avoided worst-case projections. It said it would reduce the frequency of its term repo operations to once per week, and its program to purchase bankers' acceptances to bi-weekly operations. World shares reached three-month highs as a closely watched survey of service sector activity in China recovered to pre-epidemic levels in May. Commodity-based currencies, such as the Canadian dollar, "have tended to rally recently with just a better outlook of increased growth coming out of the lockdowns," said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. The price of oil, one of Canada's major exports, rose to its highest since March despite doubts about the timing and scale of a potential extension to the oil supply pact among major producers. U.S. crude oil futures were up 0.5% at $37.01 a barrel. The Canadian dollar was trading 0.2% higher at 1.3490 to the greenback, or 74.13 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3476. It has rallied nearly 9% since hitting a four-year low in March. Canadian labor productivity grew by a record 3.4% in the first quarter as hours worked fell more sharply than business output because of lockdowns caused by the coronavirus pandemic, Statistics Canada said. Canadian government bond yields rose across a steeper yield curve, with the 10-year yield up 8.1 basis points at 0.623%. (Reporting by Fergal Smith; Editing by David Gregorio and Peter Cooney)