CANADA FX DEBT-C$ steady after early dive on North American data
* Canadian dollar at C$1.2972 or 77.09 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, July 17 (Reuters) - The Canadian dollar weakened to more than six-year lows against its U.S. counterpart on Friday, and then pared its losses, following a slew of economic data that signaled higher U.S. interest rates, while Canada's benchmark rate just dropped. Canada's annual inflation rate edged up to 1 percent in June, led by higher food prices, but the rate was tempered by cheap energy prices, government data showed. In the United States, consumer prices rose for a fifth straight month, with gasoline prices contributing to the rise, while housing starts jumped in June and building permits surged to a near eight-year high. The figures were the latest indicators supporting expectations of a rate hike this year by the U.S. Federal Reserve. "The Canadian data as a stand-alone normally probably would've helped the Canadian dollar a wee bit," said Doug Porter, chief economist at BMO Capital Markets, noting the U.S. data was likely a bigger driver for Friday's currency moves. The Canadian numbers come just days after the Bank of Canada cut interest rates for the second time this year in an effort to spur economic growth. The move has sent the loonie to its weakest level since March 2009. At 9:19 a.m. EDT (1319 GMT), the Canadian dollar was at C$1.2972 to the U.S. dollar, or 77.09 U.S. cents, little changed from the Bank of Canada's official close on Thursday of C$1.2970, or 77.10 U.S. cents. Immediately after the data was released, the currency dived briefly to C$1.3009, or 76.87 U.S. cents, a level not seen in more than six years. The currency has traded between C$1.2946 and C$1.3009 so far in the session. The Canadian dollar is expected to trade between C$1.2910 and C$1.3010 against the U.S. dollar on Friday, according to RBC Capital Markets. Canadian government bond prices were mixed across the maturity curve, with the two-year price down 3 Canadian cents to yield 0.428 percent and the benchmark 10-year rising 19 Canadian cents to yield 1.558 percent. The Canada-U.S. two-year bond spread was -25.8 basis points, while the 10-year spread was -79.8 basis points. (Reporting by Solarina Ho; Editing by Peter Galloway)
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