C$ pares some gains with trade deficit at record

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday, though paring some of its gains after domestic data showed the March trade deficit had widened to a record.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

At 9:14 a.m. EDT (1314 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at C$1.2868 to the greenback, or 77.71 U.S. cents. The currency traded in a range of C$1.2818 to C$1.2886.

The loonie has been in a holding pattern after hitting a four-week low on Tuesday at C$1.2914.

Canada’s trade deficit in March widened to a record C$4.14 billion, Statistics Canada said.

But economists said the data was not all bad news for the economy, as exports rose and a surge in imports pointed to strength in domestic demand.

“Some of the investment-related products were up solidly as were some of the consumer products,” said Doug Porter, chief economist at BMO Capital Markets. “It’s not a clearcut message for the Bank of Canada.”

Chances of an interest rate hike by July were little changed after the data at about 75 percent, the overnight index swaps market indicated. BOCWATCH

The price of oil, one of Canada’s major exports, slipped as swelling U.S. crude inventories and record weekly U.S. production clashed with OPEC supply cuts and the potential for new U.S. sanctions against Iran.

U.S. crude CLc1 prices were down 0.50 percent at $67.59 a barrel.

The U.S. dollar .DXY was little changed, consolidating some of its recent gains, after the Federal Reserve on Wednesday held interest rates steady but stayed on course to hike in June.

Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 3.5 Canadian cents to yield 1.918 percent and the 10-year CA10YT=RR rising 29 Canadian cents to yield 2.330 percent.

The gap between Canada’s 10-year yield and its U.S. counterpart widened by 1 bp to a spread of -61.1 basis points.

Reporting by Fergal Smith; Editing by Bernadette Baum