CANADA FX DEBT-C$ hits 5-1/2 month high, encouraged by China data
* Canadian dollar at C$1.0726 or 93.23 U.S. cents * Bond prices lower across the maturity curve (Adds details on trading activity, quotes, updates prices) By Leah Schnurr TORONTO, June 23 (Reuters) - The Canadian dollar firmed to its highest level against the greenback since the start of the year on Monday as data that showed China's factory sector expanded in June helped the currency extend last week's strength. The loonie has gained in five of its last six sessions, and was spurred higher on Friday by data that showed an unexpectedly strong increase in Canadian inflation for May and robust retail sales in April. With little on the domestic economic calendar this week, investors were taking their cues from overseas. The pickup in activity in China's factories, albeit at a modest pace, was the first in six months. The purchasing managers' index (PMI) figures beat expectations and gave new signs that the world's second-largest economy is stabilizing. The Canadian dollar is often sensitive to economic data from China, which is a major consumer of natural resources. "The move into expansionary territory for Chinese PMI for the first time this year has definitely been a good boost for the loonie as it increases the prospects for the export sector moving forward," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. The Canadian dollar ended the North American session at C$1.0726 to the greenback, or 93.23 U.S. cents, stronger than Friday's close of C$1.0752, or 93.01 U.S. cents. The currency hit a session high of C$1.0717, its highest level since early January, a period in which the loonie was in the midst of a sharp selloff. Despite the momentum that has pushed the loonie out of its recent trading range, the strength is likely to taper off, leaving the currency to trade sideways once again, said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto. He added that while the currency should hold on to its gains, it won't be able to move significantly higher without a shift in the Bank of Canada's neutral policy stance, which is unlikely to happen in the near term. "That's the only point where we're going to start to see the loonie take off," he said. Weak euro zone business activity data prompted investors to sell the euro, pushing it down to C$1.4587. Canadian government bond prices were lower across the maturity curve, with the two-year off 2-1/2 Canadian cents to yield 1.142 percent, while the benchmark 10-year was down 33 Canadian cents to yield 2.333 percent. (Editing by Peter Galloway)
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