CANADA FX DEBT-C$ holds near 5-week high despite wider trade deficit

    * Canadian dollar at C$1.2772, or 78.30 U.S. cents
    * Loonie touches its strongest since Feb. 27 at C$1.2745
    * Bond prices mixed across steeper yield curve

    By Fergal Smith
    TORONTO, April 5 (Reuters) - The Canadian dollar was steady
against its U.S. counterpart on Thursday, holding near an
earlier five-week high even as the greenback broadly climbed and
data showed a widening of Canada's trade deficit.
    At 9:43 a.m. EDT (1343 GMT), the Canadian dollar         
was trading nearly unchanged at C$1.2772 to the greenback, or
78.30 U.S. cents.    
    Canada's trade deficit in February jumped to C$2.69 billion
from C$1.94 billion in January as rail transport problems
slashed exports of wheat and canola, Statistics Canada said.
Analysts had forecast a C$2 billion shortfall.
    "With the Bank of Canada in data dependent mode, this
morning's report is not going to do much to pull them off the
sidelines," Dina Ignjatovic, an economist at Toronto-Dominion
Bank, in a research note.
    The central bank has raised its benchmark interest rate
three times since July to 1.25 percent but has worried about a
number of uncertainties, including the impact of past rate hikes
on highly indebted Canadians and the outlook for trade.
    Chances of an interest rate hike by May slipped to 41
percent from 45 percent before the data, the overnight index
swaps market indicated.           
    Still, the loonie has been boosted this week by optimism on
a deal to revamp the North American Free Trade Agreement. It
touched its strongest level since Feb. 27 at C$1.2745.
    The U.S. dollar        rose to a two-week high against a
basket of major currencies, encouraged by a rebound on Wall
Street and signs the United States may negotiate a resolution to
a trade dispute with China.             
    The price of oil, one of Canada's major exports, was
supported by an easing of trade tensions and a surprise draw in
U.S. crude inventories last week.
    U.S. crude        prices were up 0.90 percent at $63.94 a
    Canadian government bond prices were mixed across a steeper
yield curve, with the two-year            up 0.5 Canadian cent
to yield 1.815 percent and the 10-year             falling 10
Canadian cents to yield 2.188 percent.        
    Canada's employment report for March is due on Friday.   

 (Reporting by Fergal Smith
Editing by Susan Thomas)