CANADA FX DEBT-C$ edges higher as exports jump
* Canadian dollar at C$1.3721, or 72.88 U.S. cents * Bond prices lower across the yield curve * 2-year spread vs Treasuries at its widest in 10 years By Fergal Smith TORONTO, May 4 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday, finding some respite after hitting a 14-month low earlier this week, as data showing that the country's trade deficit had narrowed sharply offset lower oil prices. Canada posted a trade deficit of C$135 million in March, down from a revised C$1.08 billion shortfall in February, as exports hit a record high on energy shipments, Statistics Canada said. "A strong first indicator on March GDP (gross domestic product) suggests that there could be some decent momentum heading into the second quarter," said Nick Exarhos, economist at CIBC Capital Markets. Economists expect gross domestic product to grow as much as 4 percent in the first quarter. But recent strength in the domestic economy has been overshadowed by a more uncertain trade outlook, mortgage lender concerns and lower prices of oil, one of Canada's major exports. U.S. crude oil prices fell to a four-month low, down 2.05 percent at $46.84 a barrel, after U.S. crude inventories fell by less than expected. At 9:19 a.m. ET (1319 GMT), the Canadian dollar was trading at C$1.3721 to the greenback, or 72.88 U.S. cents, up 0.1 percent, according to Reuters data. The currency traded in a range of C$1.3701 to C$1.3746. On Tuesday it had slumped to a fresh 14-month low at C$1.3758. Still, the Canadian dollar will weather a "perfect storm" to regain some ground over the coming months, a Reuters poll showed on Wednesday, as a pickup in the domestic economy could prod the Bank of Canada to raise interest rates by next year. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as investors raised bets on a Federal Reserve interest rate hike in June. The two-year dipped 1.5 Canadian cents to yield 0.709 percent and the 10-year declined 15 Canadian cents to yield 1.561 percent. The 2-year yield fell 2.1 basis points further below its U.S. equivalent to a spread of -61.7 basis points, its widest since April 2007. Canada's April employment report is due on Friday. (Reporting by Fergal Smith; Editing by Bernadette Baum)
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