CANADA FX DEBT-Spain fears hold back C$ gain

* C$ ends at C$1.0229 vs US$, or 97.76 U.S. cents
    * Canadian dollar had hit one week-high
    * Bond prices retreat across curve

    By Jennifer Kwan	
    TORONTO, May 29 (Reuters) - The Canadian dollar backed off
from a one-week high against its U.S. counterpart on Tuesday and
managed to eke out a small gain, but its climb was held back by
worries over Spain's escalating borrowing costs and its fragile
banking sector.	
    Canada's currency was supported by firmness in global equity
markets, typically a barometer of investor risk appetite. The
currency climbed as high as C$1.0207 against the greenback, or
97.97 U.S. cents, its strongest level since May 22 as investors
reacted enthusiastically to reports of possible new stimulus
from China. 	
    Investors were also optimistic about recent polls showing a
party that backs Greece's international bailout was leading
ahead of a June 17 election. If the New Democracy Party can form
a government, Greece would be less likely to quit the euro.
    But gains were kept in check by broader moves in the euro,
which fell to its weakest against the greenback in nearly two
years on Spain's soaring borrowing costs and expectations more
spending will be necessary to support its ailing banking. 	
    "It's really just a reflection overall all of a
deterioration or a lack of certainty with the outlook for
Europe," said Camilla Sutton, chief currency strategist at
    The Canadian dollar ended at C$1.0229 versus the
U.S. dollar, or 97.76 U.S. cents, slightly higher from Monday's
North American session finish at C$1.0238 versus the U.S.
dollar, or 97.68 U.S. cents.	
    Canada's dollar outperformed most of its G10 currency peers
including the euro, British pound and Australian dollar. It
underperformed the New Zealand dollar and the Mexican peso.	
    Sutton said she sees the currency trading overnight in a
tight range of C$1.0220-C$1.0320 against the U.S. currency.	
    Sal Guatieri, senior economist at BMO Capital Markets, said
the Canadian dollar was also held back by U.S. data that showed
consumer confidence unexpectedly cooled in May. 	
    "Whenever we see soft economic growth in the U.S. it
undermines Canadian export growth and therefore the outlook for
the Canadian dollar," he said.	
    Later in the week, the all-important U.S. jobs report,
Canadian growth numbers, and an Irish vote on the European
Union's new fiscal treaty will provide further direction for
currency traders.	
    Canadian government bond prices drifted lower across the
curve with Canada's two-year bond sank 17 Canadian
cents to yield 1.167 percent, while the benchmark 10-year bond
 slipped 35 Canadian cents to yield 1.880 percent.