* C$ falls to 97.37 U.S. cents
* Bond prices turn higher after data
* Canada to hold 7 bond auctions in July-Sept qtr
* Canada to up frequency of cash management bond ops (Updates to close)
By Ka Yan Ng
TORONTO, June 17 (Reuters) - The Canadian dollar fell on Thursday, while bonds charged higher, as investors became more guarded after several data releases suggested a tepid economic recovery.
Earlier, the Canadian dollar climbed as investors took on more risk following Spanish bond issues that drew strong demand, which kept concerns about Europe's debt troubles at bay. [ID:nLDE65G1HJ]
It had reached a session high at C$1.0224 to the U.S. dollar, or 97.81 U.S. cents, before sentiment shifted.
The Canadian currency finished at C$1.0270 to the U.S. dollar, or 97.37 U.S. cents, down from Wednesday's finish at C$1.0254 to the U.S. dollar, or 97.52 U.S. cents.
"It's a big underperformer on the day. We can attribute that to the weak read on the Philadelphia Fed index and probably because oil is down today," said Sacha Tihanyi, currency strategist at Scotia Capital.
The Philadelphia Fed index showed factory activity in the mid-Atlantic region braked to its slowest pace in 10 months in June. [ID:nN17207354] [ID:nN17254724]
Disappointing wholesale trade figures for April in Canada and an unexpected rise in new weekly U.S. claims for jobless aid put pressure on the Canadian currency.
Also, U.S. consumer prices notched their largest decline in nearly 1-1/2 years in May.
The soft data also took its toll on other markets, such as oil and equities, which are often influential to the movement in Canada's currency. Oil was off more than 1 percent to settle below $77 a barrel. North American equity markets finished with mild gains.
"It feels like the market is generally taking a more cautious turn again," said Eric Lascelles, chief Canada macro strategist, at TD Securities.
"Part of it is the U.S. economic figures are looking soft, which is raising some doubt about the global recovery."
BONDS RISE IN FLIGHT TO SAFETY
Canadian government bond prices were lifted by the day's disappointing economic data.
Spain's auction of 3.5 billion euros of bonds was taken in stride, easing concerns it may face a Greek-style debt crisis, but a huge question mark still hangs over the outlook for sovereign debt. [ID:nLDE65G1HJ]
"How many more countries have deficits to become more transparent. More importantly, even if we know in absolute terms the deficits that are out there ... just because you get an auction at a reasonable level of pricing it's a question of whether the price is correct," said Simon Ballard, senior credit strategist at RBC Capital Markets.
"Bottom line is that the euro zone needs restructuring in order to get away from the inherent problems it has."
The two-year government bond CA2YT=RR jumped 9 Canadian cents to yield 1.725 percent, while the 10-year bond CA10YT=RR gained 42 Canadian cents to yield 3.307 percent.
Canadian bonds put in a mixed performance against U.S. Treasuries, with the short-end outperforming but the long-end underperformed.
The Canadian 10-year bond yield was 10.7 basis points above its U.S. counterpart, compared with 9.3 basis points on Wednesday.
The Bank of Canada also released its quarterly bond auction schedule, saying it will hold seven bond auctions, including one real return issue, in the July-September quarter of 2010.
It also said it would increase the frequency of cash-management bond buyback operations on a pilot basis, beginning in August. [ID:nTOR007588]
(Additional reporting by Jennifer Kwan and Pav Jordan; Editing by Mario Di Simine)