* Canadian dollar at $1.2772, or 78.30 U.S. cents
* Loonie touches its strongest since June 10 at C$1.2680
* Bond prices lower across steeper maturity curve
(Adds details, quotes; updates prices)
TORONTO/OTTAWA, June 23 (Reuters) - The Canadian dollar
strengthened to a nearly two-week high against its U.S.
counterpart on Thursday as increased chances that Britain will
remain in the European Union and higher oil prices supported the
risk-sensitive, commodity-linked currency.
A series of late opinion polls favored Britons voting in
Thursday's referendum to stay in the European Union, and
bookmakers' odds indicated a further shift toward the "Remain"
camp.
Nonetheless, the bulk of recent polls have suggested the
result was too close to call and markets remained wary.
The loonie rallied more than 1 percent to a session high of
C$1.2680, its highest level in nearly two weeks, before giving
back about half of its gains.
The loonie would weaken and the chances that the Canadian
central bank cuts interest rates would jump if Britain votes to
leave the European Union, strategists warn, noting the result
could hit global growth and spell bad news for
commodity-exporting countries.
A gain in oil prices helped support the Canadian dollar on
Thursday, but oil was likely to be a secondary factor as the
results of the referendum start to come in, said Rahim Madhavji,
president at KnightsbridgeFX.com.
"The biggest swing in the next 24 hours is going to be
Brexit, one way or the other," Madhavji said. "We'll either see
the loonie rally maybe about a percent or so if it's a stay
scenario, and all hell could break loose if it's an exit."
The Canadian dollar ended the North American
trading session at C$1.2772 to the greenback, or 78.30 U.S.
cents, stronger than Wednesday's close of C$1.2839, or 77.89
U.S. cents.
Gains for the loonie came after domestic data on Wednesday
showed retail sales rebounded in April to reach a record C$44.28
billion.
Still, the Bank of Canada has said the economy may contract
in the second quarter after a solid start to the year as a huge
wildfire in Alberta weighs on oil production.
Canadian government bond prices were lower across the
maturity curve, in sympathy with U.S. Treasuries, as increased
risk appetite reduced investor demand for safe-haven assets.
The two-year price fell 5.5 Canadian cents to
yield 0.627 percent, and the benchmark 10-year
dropped 65 Canadian cents to yield 1.301 percent. The 10-year
yield touched its highest level since June 1 at 1.319 percent.
(Reporting by Fergal Smith in Toronto and Leah Schnurr in
Ottawa; Editing by Leslie Adler)