CANADA FX DEBT-C$ gains as Canada current account deficit narrows
* Canadian dollar at C$1.0859 or 92.09 U.S. cents * 10-year bond yield around 11-month low By Leah Schnurr TORONTO, May 29 (Reuters) - The Canadian dollar strengthened against the greenback on Thursday, helped by data that showed the country's current account deficit narrowed in the first quarter, suggesting the export sector is starting to recover. The current account report helped the loonie retain positive momentum from the overnight session and offset data that showed the U.S. economy contracted in the first quarter for the first time in three years. A stronger performance by exporters helped the current account deficit narrow to C$12.39 billion ($11.37 billion). The data beat market expectations and sent the Canadian dollar to a session high. "The take away is that going forward, this momentum needs to be sustained," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. The Canadian dollar was at C$1.0859 to the greenback, or 92.09 U.S. cents, stronger than Wednesday's close of C$1.0875, or 91.95 U.S. cents. Still, the loonie remained in the trading range it has been in in recent weeks as the market weighs modestly improving economic data against the Bank of Canada's neutral policy stance. "After the slight selloff we saw yesterday in the loonie, we're moving back to our comfortable range in the mid-C$1.08s and we're really trying to find that next catalyst to shake the market up," Smith said. Unless Friday's report on first-quarter economic growth in Canada comes in significantly outside of the consensus forecast, the market will likely have to wait for next week, when the May employment report and the Bank of Canada's latest policy statement are released, to see a real driver, Smith said. Canadian government bond yields continued to weaken, taking their cue from U.S. Treasuries. The yield on the Canadian benchmark 10-year bond was hovering around an 11-month low at 2.222 percent, with the price up 3 Canadian cents. The two-year price was up 0.3 of a Canadian cent to yield 1.040. (Editing by Peter Galloway)
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