CANADA FX DEBT-C$ retreats a bit more; focus on central bank

* Canadian dollar at C$1.0966 or 91.19 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, April 11 (Reuters) - The Canadian dollar pulled
back from recent strong gains for a second session on Friday as
the market turned its attention to next week's Bank of Canada
policy statement.
    South of the border, data showed producer prices had their
largest increase in nine months in March. That report helped the
U.S. dollar trim some declines, putting further pressure on the
    Since hitting a 4-1/2 year low in mid-March, the Canadian
dollar has climbed about 3 percent, but it has given back some
gains over the last two days.  
    Some signs of strength in the domestic economy, as well as a
weaker U.S. dollar have boosted sentiment for the loonie, which
came under intense selling pressure earlier in the year. Many
analysts don't expect the gains to last.
    "With the surprising strength in the loonie over the last
week or so, we got to an area where, in the short term, the
loonie is overvalued, in my opinion," said Scott Smith, senior
market analyst at Cambridge Mercantile Group in Calgary.
    The Canadian dollar was at C$1.0966 to the
greenback, or 91.19 U.S. cents, weaker than Thursday's close of
C$1.0929, or 91.50 U.S. cents.
    With no domestic economic data on tap on Friday, investors
are turning their attention to the Bank of Canada's policy
statement next Wednesday. A more dovish central bank tone has
hit the loonie hard in the past few months and markets will be
watching to see if its stance changes.
    The Bank of Canada statement poses a risk for the loonie as
the more positive sentiment over the currency recently could set
some investors up for disappointment if the central bank
maintains its dovish tone, Smith said.
    "I think with the rally that we've seen over the last couple
weeks, we could see that fade more and I don't think it's a far
stretch to say we could be back at C$1.10 to C$1.11."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2-1/2 Canadian
cents to yield 1.042 percent and the benchmark 10-year
 up 37 Canadian cents to yield 2.401 percent.

 (Editing by Peter Galloway)