CANADA FX DEBT-C$ loses steam in muted session
* Canadian dollar at C$1.0657 or 93.84 U.S. cents * Bond prices mostly lower across maturity curve (Recasts with the Canadian dollar turning lower, adds details, quotes, updates prices) By Leah Schnurr TORONTO, July 4 (Reuters) - The Canadian dollar weakened against the greenback on Friday, pulling back from recent strong gains in a quiet session with markets south of the border closed for the Fourth of July holiday. The loonie touched a six-month high in the previous session as analysts viewed a robust U.S. jobs report as ultimately benefiting Canada, even though the data initially knocked the currency lower. With fewer market participants than usual and a lack of fundamental drivers, the currency held on to its gains early on Friday but then drifted lower through the session, but it is still up 2.6 percent since early June. "The Canadian dollar has obviously still held onto a large portion of its gains over the last couple weeks," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto. "The loonie still does have a lot of momentum on its side." The Canadian dollar ended the North American session at C$1.0657 to the greenback, or 93.84 U.S. cents, weaker than Thursday's close of C$1.0639, or 93.99 U.S. cents. A number of factors combined to help the Canadian dollar run up over the past month, including higher than expected Canadian inflation in May, rising oil prices, and investors rushing to cover short positions in the currency. "There has been this broad-based shift overall, so it's not like it's just been one event that has driven Canadian dollar strength, it really has been little pieces coming together from very different areas," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. While the loonie has had traction, many analysts say the rally is likely reaching its peak. Analysts will be watching to see how the Bank of Canada reacts to the stronger-than-expected inflation figures when it releases its next monetary policy statement in mid-July. "Pretty quickly we're going to reach a point where the Canadian dollar has likely gone too far," Sutton said. "I would expect the Canadian dollar likely feels more comfortable around C$1.08 than it does around C$1.06." Canadian government bond prices were mostly lower across the maturity curve, though the two-year was unchanged to yield 1.135 percent. The benchmark 10-year was down 8 Canadian cents to yield 2.332 percent. (Editing by Sandra Maler; and Peter Galloway)
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