CANADA FX DEBT-C$ builds on recent momentum, hits 5-1/2 month high
* Canadian dollar at C$1.0693 or 93.52 U.S. cents * Bond prices higher across the maturity curve (Adds details, quotes and updates prices) By Leah Schnurr TORONTO, June 26 (Reuters) - The Canadian dollar strengthened to a 5-1/2-month high against the greenback on Thursday, breaking through the C$1.07 level as a dearth of domestic economic data this week cleared the way for it to extend its recent run higher. A soft U.S. dollar also benefited the Canadian dollar after data showed U.S. consumer spending rose less than expected in May. That followed figures on Wednesday that showed a sharp contraction in U.S. economic growth for the first quarter. The loonie has only declined in one session this week so far, continuing the gains it made last week on stronger-than-expected Canadian inflation data, which sparked doubts about how long the Bank of Canada will be able to stick with its neutral policy stance. The combination of U.S. dollar weakness, momentum on the loonie's side and investors covering their short positions all helped push the Canadian dollar higher, said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto. With little on the horizon to change those factors, "that suggests to me there might be a little bit more to go" in the loonie's rise, Moore said. Analysts expect the currency could grind higher with a light economic calendar this week and next, but they say it is unlikely to make further sustainable gains in the longer term without a change in the central bank's stance. The Canadian dollar ended the North American session at C$1.0693 to the greenback, or 93.52 U.S. cents, stronger than Wednesday's close of C$1.0722, or 93.27 U.S. cents. The loonie hit a session high of C$1.0684, its strongest level since early January, when the currency was in the midst of a sharp selloff. While investors will see Canadian monthly economic growth and U.S. unemployment figures next week, trading could be quiet due to market closures for the July 1 Canada Day holiday and the July 4 holiday in the United States. The C$1.0640 level will be the next area to watch, said Moore, though he added that from a fundamental perspective, the Canadian dollar would need to see something significant, such as a shift in tone from the Bank of Canada, to get through those levels. The Bank of Canada will release a monetary policy statement in mid-July, but analysts don't expect it to show a big change in the bank's position. Because of that, "we're getting close to the strongest levels of the loonie we're likely to see over the next few months," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. Canadian government bond prices were higher across the maturity curve, with the two-year up 1-1/2 Canadian cents to yield 1.109 percent, and the benchmark 10-year up 30 Canadian cents to yield 2.240 percent. (Editing by Peter Galloway)
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