CANADA FX DEBT-C$ softens ahead of key trade data as oil remains volatile

(Adds analyst comment, closing figures, details)
    * Canadian dollar at C$1.3271, or 75.35 U.S. cents
    * Bond prices mostly lower across maturity curve

    By Solarina Ho
    TORONTO, Sept 2 (Reuters) - The Canadian dollar eased
against the U.S. dollar on Wednesday as it struggled to advance
on the back of stronger crude prices and as investors eyed key
July trade balance data due on Thursday.
    Market participants hope the trade numbers will bring more
clarity on whether the impact of cheap crude has been contained
as well as whether a soft Canadian dollar has helped stimulate
other parts of the economy.
    "In order to get a sustained Canadian dollar rally, we need
to see a sustained increase in exports," said Adam Button,
currency analyst at ForexLive in Montréal.
    Economists polled by Reuters are currently expecting a C$1.3
billion trade deficit for July.
    Investors are currently split on whether the Bank of Canada
could issue a third interest rate cut in the coming months and
this week's data, which also includes employment figures for
August due on Friday, could provide further direction.
    "Some optimism on the global economy is returning, but the
overall outlook is deeply uncertain. Until that resolves, it
will remain extremely difficult for the Canadian dollar to catch
a bid," he added.
    The Canadian dollar lost 0.37 percent to finish at
C$1.3271 to the greenback, or 75.35 U.S. cents, weaker than the
Bank of Canada's official close of C$1.3222, or 75.63 U.S. cents
on Tuesday.
    The loonie retreated to C$1.3325 earlier in the session, not
far from the 11-year lows touched last week, as crude prices
sank nearly 5 percent at one point.
    "The defining feature of the Canadian dollar right now is
its inability to rally when oil prices rise and trading today
especially underscores that," said Button. "When oil stormed
back, the Canadian dollar only gained marginally."
    Investors have struggled to pin a bottom for crude prices,
which tumbled to multiyear lows last week before rallying 25
percent over three days. The volatility has continued this week
with further swings in both directions.
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year down half a
Canadian cent to yield 0.420 percent and the benchmark 10-year
 falling 28 Canadian cents to yield 1.457 percent.
    The Canada-U.S. two-year bond spread was -29.2 basis points,
while the 10-year spread was -73.4 basis points.

 (Reporting by Solarina Ho, editing by G Crosse)