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* C$ at C$1.0498 vs US$, or 95.26 U.S. cents * U.S. Treasury prices slide on Fed-induced selloff * End of month adds to volatility By Andrea Hopkins TORONTO, June 28 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as prices for U.S. Treasuries slid in volatile trade and yields shot to a near two-year high on a recent Fed-induced selloff. The U.S. dollar fell against the euro but rose against the yen and commodity-linked currencies including the Canadian and Australian dollars, as investors increasingly priced in the chance that the U.S. Federal Reserve will begin to downsize its asset purchase program, perhaps as early as September. The U.S. dollar had risen forcefully since last week, when Fed chief Ben Bernanke discussed a potential slowing of the pace of its stimulative asset purchases as the economy improves. "We're seeing the U.S. yield curve and the U.S. 10-year moving back up fairly steeply," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London. "It's providing a backstop for the U.S., where there might be some cautious U.S. dollar buying into month-end as well. The combination of those two factors is keeping the Canadian dollar a little bit on the defensive and perhaps could see us on the way to C$1.055 if not today then certainly into next week." At 9:40 a.m. (1340 GMT), the Canadian dollar was trading at C$1.0498 to the U.S. dollar, or 95.26 U.S. cents, down from Thursday's North American session close at C$1.0475 versus the U.S. dollar, or 95.47 U.S. cents. The Canadian currency had briefly pared losses against its U.S. counterpart in early trade after Canadian data showed the economy grew in April, strengthening to C$1.0476 to the U.S. dollar, or 95.46 U.S. cents, before falling back. Canada's economy grew by 0.1 percent in April from March - the fourth consecutive month-on-month advance - on gains by service industries, Statistics Canada said on Friday. The modest increase matched analysts' expectations. The Bank of Canada forecasts that second-quarter growth on an annualized basis will be 1.8 percent, down from the 2.5 percent in the first quarter. Canadian government debt prices were mostly weaker. The two-year bond was down 5.5 Canadian cents to yield 1.226 percent, while the benchmark 10-year bond fell 50 Canadian cents to yield 2.472 percent.