CANADA FX DEBT-C$ in modest retreat after Keystone comments, U.S. data

* C$ at C$1.0509 vs US$, or 95.16 U.S. cents
    * Keystone approval on radar after Obama comments
    * China's central bank moves to allay banking crisis fears
    * Bond prices slip

    By Alastair Sharp
    TORONTO, June 25 (Reuters) - The Canadian dollar softened
against the greenback on Tuesday but did not break new ground
after weakening some 3 percent in recent sessions following
investor worries about when the U.S. Federal Reserve will rein
in its monetary stimulus.
    The currency saw some late afternoon volatility after U.S.
President Barack Obama said he would block a proposed oil
pipeline from Canada if it added to carbon pollution.
    "The knee jerk reaction was that this was going to make it
less likely for Keystone approval and that that's a negative for
the Canadian dollar, but the market is starting to rethink
that," said Adam Button, currency analyst at ForexLive, who
predicted eventual approval of the Keystone pipeline could boost
the Canadian currency by two cents.
    U.S. data on Tuesday showed strong gains in business
spending plans and orders for manufactured goods last month and
the largest annual rise in house prices in seven years in April.
    But the greenback did not appreciate meaningfully against
other major currencies, including the Canadian dollar, after
several days of oversized gains last week.
    "The economic data today was excellent news for the U.S.
dollar yet it struggled to gain, and in light of that traders
are coming in and taking profits against it," Button said.
    The Canadian dollar ended the session at C$1.0509
versus the U.S. dollar, or 95.16 U.S. cents, compared to
Monday's finish at C$1.0486, or 95.37 U.S. cents. The currency
had touched C$1.0556 on Monday, its weakest level since Oct. 5,
    In China, fears of a banking crisis were allayed after the
People's Bank of China calmed some of those concerns overnight,
helping world equities recoup some of their recent losses. U.S.
Treasuries finished the day lower in choppy trade.
    "It's been a volatile few days - that's a bit of an
understatement. I think it's generally a situation where the
Canadian dollar is taking its cues from global risk sentiment
and from events abroad," said Mazen Issa, macro strategist at TD
Securities. "In terms of today's trading, it has been holding
fairly steady."
    Canadian government debt prices slipped across the maturity
curve, with the two-year bond losing 1.5 Canadian
cents to yield 1.253 percent. The benchmark 10-year bond
 shed 32 Canadian cents to yield 2.527 percent.