CANADA FX DEBT-Canadian dollar rebounds as investors reject breakout from recent range

By Fergal Smith

TORONTO, March 3 (Reuters) - The Canadian dollar recovered from a near six-week low against its U.S. counterpart on Tuesday in a sign that the recent sideways pattern for the commodity-linked risk-sensitive currency remains intact despite Middle East conflict.

The loonie CAD= was trading nearly unchanged at 1.3670 per U.S. dollar, or 73.15 U.S. cents, after touching its weakest intraday level since January 23 at 1.3752.

"From a technical perspective, the persistent rejection above 1.3700 reinforces the view that USD-CAD remains confined to a well-defined range rather than transitioning into a structural breakout phase," said Tony Valente, senior FX dealer at AscendantFX.

"Absent a clear catalyst, whether a meaningful repricing of Fed expectations, a Bank of Canada surprise, or a decisive move in energy markets, advances into the mid-1.37s are likely to continue attracting selling interest."

Bank of Canada Governor Tiff Macklem is due to participate on Wednesday in an informal conversation on financial stability risks.

On Monday, Deputy Governor Sharon Kozicki said that supply-side shocks driven by structural changes, such as protectionist U.S. trade policies and developments in artificial intelligence, could sometimes require interest rate hikes to lower inflation even when the economy was weak.

Israeli and U.S. forces pounded targets across Iran, prompting Iranian retaliatory strikes around the Gulf as the conflict spread to Lebanon, rattling global markets and sending the price of oil, one of Canada's major exports, sharply higher.

U.S. crude oil futures CLc1 were up 4.5% at $74.45 a barrel, while the safe-haven U.S. dollar .DXY notched sharp gains for a second straight day against a basket of major currencies.

Canadian bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year CA10YT=RR was up 2.1 basis points at 3.242%, after earlier touching its highest level since February 12 at 3.326%.