CANADA FX DEBT-C$ up on greenback retreat but down 2.2 pct in May

* C$ at C$1.0300 vs US$, or 97.09 U.S. cents
    * U.S. jobless claims up, 1st quarter GDP estimates cut back
    * Canadian PPI down; 1st quarter current account gap narrows
    * Japanese public pension fund mulls more flexible investing
    * 10-year government bond yields highest in more than year

    By Alastair Sharp
    TORONTO, May 30 (Reuters) - The Canadian dollar gained
against the U.S. dollar on Thursday, as the greenback retreated
against a string of currencies after data showed U.S. jobless
claims rose and estimates of first-quarter U.S. economic growth
were scaled back.
    But the loonie, as Canada's currency is colloquially known,
slipped 2.2 percent against the greenback in May.
    The Canadian dollar's retreat this past month was largely
driven by broad strength in the greenback, helped by broadly
positive data and Federal Reserve hints that it may slow it
stimulus program. 
    Thursday's U.S. data, however, reinforced the view that the
U.S. economy might be entering yet another soft patch.
    "The weaker data in the United States takes the pressure off
the Fed to taper and it also erodes one of the foundations of
the U.S. dollar bull market," said Adam Button, a currency
analyst at ForexLive in Montreal.
    In Canada, producer prices were down for the first time in
five months, while the current account gap narrowed in the first
    "We actually had a current account in Canada that was
slightly better than market expectations, but weighing against
that is that most of the commodity currencies are lower today,"
said Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets. 
    The Canadian dollar ended the session trading at
C$1.0300 versus the U.S. dollar, or 97.09 U.S. cents, stronger
than Wednesday's North American close of C$1.0352, or 96.60 U.S.
    It was also stronger against its commodities-linked sister
currencies, the Australian and New Zealand 
    The Canadian currency's strength was capped, however,
following a Reuters story that said Japan's public pension fund
- worth over $1 trillion - was considering a change in strategy.
    "The thing that's getting a lot of chatter is the potential
in Japan for the pension fund there to start reallocating toward
domestic equities and away from international assets. That's
weighing a little bit on commodity currencies," Chandler said.
    Looking ahead, quarterly and monthly gross domestic product
data from Canada will be released on Friday. First quarter GDP
is expected to rise 2.3 percent on an annualized basis,
according to a Reuters poll. 
    Expectations for the GDP have been raised by the current
account reading and a recent Bank of Canada statement that
growth likely exceeded its projection of 1.5 percent.
    "If we see a (GDP) number that doesn't really corroborate
the central bank's expectations, we could certainly see some
Canadian dollar weakness on the back of that," said Gareth
Sylvester, a director at Klarity FX.
    Canadian government bond prices were mixed, with the
two-year bond down half a Canadian cent to yield
1.079 percent and the benchmark 10-year bond up one
Canadian cent to yield 2.066 percent, just off its highest yield
in more than a year.