CANADA FX DEBT-C$ post-Fed rally fades; inflation data in focus
* Canadian dollar at C$1.2227 or 81.79 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, June 18 (Reuters) - The Canadian dollar gave up all of its gains against the greenback on Thursday, despite a broadly weaker U.S. dollar and stronger price of oil, as markets digested the implications of the Federal Reserve's more-dovish-than-forecast comments. Still, the Fed is expected to raise interest rates sometime this year. It signaled on Wednesday, though, that increases could start later than anticipated, with the U.S. economy growing more slowly than previously forecast after contracting in the first quarter. "A really big roller coaster day. What you're seeing is, not only in foreign exchange but in all trading products, an attempt to find a new equilibrium as the markets digest what the Fed said and what the Fed did not say," said Brad Schruder, director of foreign exchange at BMO Capital Markets. "As far as today goes, you could probably classify it as a little bit of exuberance taking the Canadian dollar too far as the market rebalances." The Canadian dollar finished at C$1.2227 to the greenback, or 81.79 U.S. cents, little changed from the Bank of Canada's Wednesday close of C$1.2236, or 81.73 U.S. cents. The Fed comments, combined with May inflation data that came in just shy of forecasts, kept the U.S. dollar under pressure and helped drive the loonie up more than 0.8 percent to its strongest level in about a month. The currency traded between C$1.2127 and C$1.2250 during the session. Overhanging all markets, however, were concerns that Greece and its international creditors will be unable to reach a deal to prevent the debt-ridden country from defaulting at the end of the month. "That being said, the short-term path for the Canadian dollar does look somewhat bright," said Schruder, who advised those selling U.S. dollars to look at rallies toward C$1.23 to C$1.24 as a good place to hedge short term exposure. For buyers, look for moves below C$1.20 into C$1.1850. May Canadian inflation data due at 8:30 a.m. EDT (1230 GMT) on Friday will be key for market watchers, along with retail sales data for April. Canadian government bond prices were mixed across the maturity curve, with the shorter-term notes slightly higher. The two-year was down 3.5 Canadian cents to yield 0.622 percent, and the benchmark 10-year was down 36 Canadian cents to yield 1.792 percent. (Reporting by Solarina Ho; Editing by Lisa Von Ahn and Diane Craft)
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