CANADA FX DEBT-C$ edges higher in muted action, bonds strengthen
* Lower oil prices capping C$'s move
* Bond prices rally after weak U.S. data
By Frank Pingue
TORONTO, May 14 (Reuters) - The Canadian dollar was a touch higher versus the U.S. greenback on Thursday morning as buying by traders who feel a recovery is well underway offset a widespread view that the currency has gotten ahead of itself.
After a largely uninterrupted charge to a six-month high earlier this week on hopes the global economic decline may at least be troughing, the domestic currency took a big step backwards as some felt its move was overdone.
But it was largely unchanged from its close in the previous session as investors awaited some direction from North American equities, which have been a key factor in its performance.
"The market is still struggling with the two opposing forces, the one being the whole green shoot camp that's saying we are going to see a sharp recovery," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"But since last week the voices from the opposing camp have became louder that the rally in risky assets has gone too far, reflecting a too optimistic recovery."
At 9:10 a.m. (1310 GMT), the Canadian unit was at C$1.1745 to the U.S. dollar, or 85.14 U.S. cents, up from C$1.1759 to the U.S. dollar, or 85.04 U.S. cents, Wednesday's close.
The fall from the high earlier this week picked up steam on Wednesday after data from the United States showed retail sales fell for the second straight month in April, which dented hopes the economy would soon emerge from recession. [ID:nN13384420]
Strauss said the U.S. data was one more factor backing the argument of those who feel the Canadian dollar, which generally slides when investors feel less comfortable taking on risk, had moved too far too fast.
With no key domestic data ECONCA due until Friday's manufacturing survey for March. the Canadian currency is likely to take its direction from equities, oil prices and the U.S. dollar.
The price of oil, a key Canadian export whose price often influences action, slipped further from a six-month high after the International Energy Agency forecast global oil consumption will fall this year. [ID:nSIN503436]
BOND PRICES HIGHER
Canadian bond prices followed the bigger U.S. Treasury market slightly higher across the curve after data from south of the border showed an unexpectedly large number of claims for jobless benefits. [ID:nN14464671]
The data convinced dealers to snap up more secure assets like government debt, an area that has been rallying of late given the selloff in equities.
The benchmark two-year Canadian government was up 4 Canadian cents at C$100.31 to yield 1.095 percent, while the 10-year bond rallied 12 Canadian cents to C$105.65 to yield 3.091 percent.
The 30-year bond was up 30 Canadian cents at C$119.65 to yield 3.848 percent. (Editing by Jeffrey Hodgson)
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