July 27, 2017 / 2:13 PM / in 4 months

CANADA FX DEBT-C$ eases from two-year highs as U.S. dollar firms on data

    * Canadian dollar at C$1.2481, or 80.12 U.S. cents
    * Bond prices higher across the maturity curve
    * Touches two-year high of C$1.2414, or 80.55 U.S. cents

    TORONTO, July 27 (Reuters) - The Canadian dollar touched a
new two-year high against the greenback on Thursday before
slipping in the wake of a slew of U.S. data that indicated an
acceleration in growth during the second quarter.
    The Canadian dollar rallied on Wednesday after the U.S.
Federal Reserve issued a more dovish policy statement that left
interest rates unchanged but addressed concerns about weaker
inflation more explicitly than in the past.              
    The Fed's tweaked language on inflation sparked investor
concerns about U.S. economic growth and drove the U.S. dollar
index       , which measures the currency against six key
counterparts, to a 13-month trough.
    U.S. data on Thursday showed that while new orders for key
U.S.-made capital goods unexpectedly fell in June, shipments
increased for a fifth straight month. Other data showed a sharp
narrowing in the goods trade deficit last month and increases in
both retail and wholesale inventories.             
    At 9:29 a.m. EDT (1329 GMT), the Canadian dollar         
was trading at C$1.2482 to the greenback, or 80.12 U.S. cents,
down 0.3 percent. The currency traded between C$1.2414, its
strongest level since late June 2015, and C$1.2496.
    Analysts are skeptical the Canadian dollar will be able to
strengthen much further, with expectations the Bank of Canada
will raise interest rates one more time this year already fully
priced into the market. With a lack of domestic drivers this
week, the currency has taken its cues from the U.S. dollar.
    A combination of a soft greenback, strong Canadian economic
data and rate hike expectations have propelled the loonie some
10 percent higher over the last three months. 
    Prices of oil, a key Canadian export, have also climbed to
near eight-week highs, though analysts note that the traditional
correlation between the currency and oil has broken down
recently.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year            price flat to yield
1.292 percent and the benchmark 10-year             falling 5
Canadian cents to yield 1.974 percent.
    The Canada-U.S. two-year bond spread stood at -7.5 basis
points, while the 10-year spread was at -34.2 basis points.

 (Reporting by Solarina Ho; Editing by Paul Simao)
  
 

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