CANADA FX DEBT-C$ pulls back slightly after string of gains
* Canadian dollar at C$1.0744 or 93.08 U.S. cents * Bond prices higher across the maturity curve (Adds details on market activity, quotes, updates prices) By Leah Schnurr TORONTO, June 24 (Reuters) - The Canadian dollar weakened modestly against the greenback on Tuesday, retreating from a 5-1/2 month high as a lack of domestic economic data this week left investors without reason push it higher. It was only the second session in the last six days in which the loonie has declined after it rallied last week after data showed a surprisingly strong rise in Canadian inflation and robust retail sales. The increase in May's annual inflation rate could put pressure on the Bank of Canada to stop fretting about the low inflation environment in Canada and alter the neutral policy stance it has held since last October. But a quick shift by the bank is not expected. Analysts say any further significant gains by the Canadian dollar could be difficult without a change in the central bank's tone. "Inflation pushing above 2 percent does make it hard for the Bank of Canada to be in a truly neutral stance, (which means) rate cuts as equal as rate hikes," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. While the market sees the possibility of a rate cut as increasingly unlikely, the central bank will still be cautious not to sound too aggressive, Mikolich said. "I don't think the bank is keen - especially now with the Canadian dollar strengthening - to switch to a more hawkish stance, which would see the Canadian dollar strengthen and defeat the gains on the export sector that they're hoping to see continue," he said. The Canadian dollar ended the North American session at C$1.0744 to the greenback, or 93.08 U.S. cents, weaker than Monday's close of C$1.0726, or 93.23 U.S. cents. The currency hit a high of C$1.0716 overnight, its highest level since the start of the year. The C$1.0710 level is likely to act as a floor for the U.S. dollar-Canadian dollar pairing, unless there is a change in the Bank of Canada's message or June's job figures come in surprisingly hot, said Ken Wills, currency strategist and broker at CanadianForex in Toronto. "It looks like we've established a new range (from) C$1.0710 up to C$1.0850, I would anticipate between now and July 16 when the Bank of Canada comes out," he said in reference to the central bank's next policy statement. Canadian government bond prices were higher across the maturity curve, with the two-year up 4-1/2 Canadian cents to yield 1.121 percent and the benchmark 10-year up 43-1/2 Canadian cents to yield 2.287 percent. (Editing by Peter Galloway)
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