* C$ hits C$0.9700 to the U.S. dollar, or $1.0309
* Bonds weaker as investors return to riskier assets
TORONTO, June 14 (Reuters) - The Canadian dollar firmed to its strongest level against the U.S. dollar since the start of the month on Tuesday following positive North American data and news out of China that soothed fears of a hard landing.
Canadian industrial capacity use rose in the first quarter as manufacturers showed renewed strength after a year of slowing growth. [ID:nN14125114]
U.S. retail sales fell less than expected in May, while producer prices rose more than expected. Retail sales were depressed by a sharp drop in autos due to parts shortages following the Japan earthquake. Excluding autos, however, sales rose modestly in May. [ID:nCAT005457] [ID:nN14189699]
At 8:46 a.m. (1246 GMT), the currencystood at C$0.9700 to the U.S. dollar, or $1.0309, stronger than Monday's North American finish at C$0.9768 to the U.S. dollar, or $1.0238. This was the currency's best performance since June 1.
China's inflation accelerated in May, prompting Beijing to hike its reserve ratio for the ninth time since October, but it did not raise interest rates as some feared.
"Normally that's risk-off, and usually we see a bit of a flight to the dollar on that, but instead today, it seems like the market's ignoring that," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"We've seen stock futures pointing in the right direction, and with that Canada's doing a little bit better today ...there definitely seems to be a bit more of a positive sentiment today."
A flurry of Chinese economic data, including inflation and industrial output, suggested economic growth was slowing down, but not too quickly, relieving concerns that the world's second-biggest economy was heading for a hard landing. [ID:nNL3E7HE05P]
The major Canadian data this week, manufacturing shipments data for April, due Wednesday, is expected to be weak due to supply chain disruptions from the Japan earthquake.
Canadian bond prices were weaker across the curve as the positive sentiment sent investors back into riskier assets.[US/]
The two-year bondwas down 7 Canadian cents to yield 1.503 percent, while the 10-year bond lost 35 Canadian cents to yield 3.045 percent. (Reporting by Solarina Ho, Editing by Chizu Nomiyama)
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