CANADA FX DEBT-C$ in modest rally after upbeat July growth data
* Canadian dollar at C$1.3398, or 74.64 U.S. cents * Bond prices fall across the maturity curve By Solarina Ho TORONTO, Sept 30 (Reuters) - The Canadian dollar rebounded against the greenback on Wednesday, bolstered by data showing faster-than-expected economic growth in Canada, but it failed to sustain its session-high gains as overall sentiment remained weary. The economy grew 0.3 percent in July, more than the 0.2 percent economists had been forecasting, in the second straight month of expansion after a dismal first five months of the year. "I think it's pretty encouraging that the Canadian economy has bounced back," said BMO Capital Markets senior economist Benjamin Reitzes. He noted, however, that a rebound in oil prices that drove a large part of the July increase was probably unsustainable. At 9:26 a.m. EDT (1326 GMT), the Canadian dollar was trading at C$1.3398 to the U.S. dollar, or 74.64 U.S. cents, stronger than the Bank of Canada's official close of C$1.3418, or 74.53 U.S. cents. It rallied to a session high immediately after the data but quickly pared gains. "The view on Canada's just so negative right now, it's probably going to be tough for the Canadian dollar to gain meaningful traction," Reitzes said. "Opportunity to sell - I think that's the way people are looking at it right now. Until that mindset changes, it's going to be tough for Canada." The loonie, which had softened to an 11-year intraday low of C$1.3457 in the previous session, was trading between C$1.3385 and C$1.3431 so far on Wednesday. Investor attention will shift toward U.S. employment data for September, due at 8:30 a.m. EDT on Friday. Economists are forecasting 203,000 new jobs. A report by payrolls processor ADP showed U.S. private employers added 200,000 jobs this month, beating economists' expectations and reinforcing the possibility that the Federal Reserve could raise interest rates before the end of the year. Canadian government bond prices fell across the maturity curve, with the two-year down 3 Canadian cents to yield 0.523 percent and the benchmark 10-year falling 28 Canadian cents to yield 1.463 percent. The Canada-U.S. two-year bond spread narrowed to -13.4 basis points, while the 10-year spread narrowed to -61.8 basis points. (Reporting by Solarina Ho; Editing by Lisa Von Ahn)
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