CANADA FX DEBT-C$ weakens as U.S. data aids greenback rise

* C$ at C$1.0368 to US$, or 96.45 U.S. cents

* Loonie slips 0.4 pct this week, down 2.9 pct in May

* Q1 GDP growth beats expectations, BOC forecast

* C$ hits strongest level in two years vs Aussie

By Alastair Sharp

TORONTO, May 31 (Reuters) - The Canadian dollar ended weaker against the U.S. dollar on Friday, as supportive data showing the Canadian economy grew at a faster-than-expected pace in the first quarter was more than offest by upbeat U.S. data that boosted the greenback.

The loonie, as Canada’s currency is colloquially known, closed at C$1.0368 to the greenback, or 96.45 U.S. cents, much lower that the C$1.0300 level at Thursday’s North American close.

The Canadian currency slipped 0.4 percent this week and ended the month 2.9 percent lower than it started it.

The currency got an early boost from the Canadian GDP data, but that faded on the release of similarly strong U.S. numbers.

“We’re not used to it moving so much, especially being so volatile, up and down a few times today. It was like the good old days,” said Steve Butler, a director of foreign exchange trading at Scotiabank.

Butler said the Canadian currency is more likely to test further weakness around C$1.05 than to return to near equal value with the U.S. dollar in the next few weeks.

In the morning, data showed stronger exports helped rouse the Canadian economy from its sluggish end to 2012, with annualized economic growth of 2.5 percent exceeding the median projection of analysts in a Reuters poll and easily beating the central bank’s lowered forecast.

But the fine print of the GDP was less impressive than the headline, and currency traders later sold off the loonie, a move exacerbated by improved factory activity in the U.S. Midwest boosting the greenback.

The loonie had better luck against other commodity-linked peers, touching its strongest level against the Australian dollar in more than two years.

It has had a rough time this month, falling as traders assume Canada’s economy would lag its southern neighbor’s growth and as expectations grew for a slowdown in the U.S. Federal Reserve’s monetary stimulus efforts.

That thesis has led bond yields on U.S. government debt to spike sharply, helping the greenback gain over the loonie by attracting global capital flows.

Prices for Canadian government debt were mixed on Friday. The two-year bond slipped less than a Canadian cent to yield 1.082 percent, while the benchmark 10-year bond added 3 Canadian cents to yield 2.064 percent.