CANADA FX DEBT-C$ firms after disappointing U.S. GDP
* Canadian dollar at C$1.0726 or 93.23 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, June 25 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday, putting it close to a 5-1/2-month high after data that showed the U.S. economy contracted sharply in the first quarter weighed on the greenback. The data helped the loonie resume its recent run higher, making for the fifth session in six days that it has gained. Surprisingly strong domestic inflation figures last week helped fuel the currency as investors evaluate the Bank of Canada's policy stance. U.S. gross domestic product fell at a 2.9 percent annual rate in the first three months of the year, the economy's worst performance in five years and a steeper rate of contraction than previously estimated. Still, there are signs growth has since rebounded. "Everybody expects a bounce - correctly, I think - in the second quarter, but you're still left with first-half growth that's going to be quite a bit weaker than people had thought," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto. "It's undermining the U.S. dollar generally and Canada's the beneficiary there." Still, the slowdown in growth south of the border is ultimately not good news for Canada, whose largest trading partner is the United States, though the market was looking past that for now. "At least for now, people in the market generally are still willing to give the benefit of the doubt that a firm recovery is still intact in the U.S. despite these numbers," said Chandler. The Canadian dollar was at C$1.0726 to the greenback, or 93.23 U.S. cents, stronger than Tuesday's close of C$1.0744, or 93.08 U.S. cents. The loonie was not far from Tuesday's high of C$1.0716, which was the currency's highest level since the beginning of January. The greenback was off 0.2 percent against a basket of currencies. Canadian government bond prices were higher across the maturity curve, with the two-year up 2-1/2 Canadian cents to yield 1.109 percent and the benchmark 10-year up 32 Canadian cents to yield 2.251 percent. (Editing by Meredith Mazzilli)
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