CANADA FX DEBT-C$ holds steady vs US$, bond yields rise on Fed prospects
* Canadian dollar close at C$1.0904 or 91.71 U.S. cents * Bond prices fall across the maturity curve By Solarina Ho TORONTO, June 10 (Reuters) - The Canadian dollar held steady against the greenback in muted trading on Tuesday but moved more against other currencies, including the euro, while bond yields rose as market attention turned toward the prospect of higher U.S. interest rates. The Canadian dollar firmed against the euro, which was under pressure after the European Central Bank cut interest rates to record lows last week. Traders' bracing for potential signs of a Fed rate hike earlier than forecast helped push U.S. government bond yields to one-month highs, which in turn drew demand for U.S. dollars. "You had a mixed risk tone today. Bond yields continued to back up, but if you look at equity markets, they were softer most of the day and very little in data, so we ended up just chopping around with the currencies," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. The Canadian dollar finished Tuesday's session at C$1.0904 to the greenback, or 91.71 U.S. cents, little changed from Monday's close of C$1.0908, or 91.68 U.S. cents. The currency was at around C$1.4771 against the European currency after Monday's close of C$1.4821, but it weakened against its commodity-currency peers, the Australian and New Zealand dollars . "I think cross-flows are acting as a bit of a restraint on USD/CAD. We think generally speaking, USD/CAD is looking quite supported in the C$1.08-figure area," said Shaun Osborne, chief currency strategist at TD Securities. Traders will eye U.S. retail sales and comments from Bank of Canada's Stephen Poloz on Thursday for further direction. The market is expecting positive retail news, which could push the U.S. dollar higher and weaken the Canadian dollar. "Poloz may potentially say something on the currency, or the view on monetary policy. When he has in the past, it has usually meant a weaker Canadian dollar," Chandler noted. Canadian government bond prices were weaker across the maturity curve, with the two-year down 2 Canadian cents to yield 1.080 percent and the benchmark 10-year down 22 Canadian cents to yield 2.345 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and Dan Grebler)
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