CANADA FX DEBT-C$ firms modestly but stays stuck in its range

Reuters

* Canadian dollar at C$1.0729 or 93.21 U.S. cents * Bond yields rise, but 10-year not far from 1-year low (Adds details, quotes, updates prices) By Leah Schnurr TORONTO, July 23 (Reuters) - The Canadian dollar firmed modestly against the greenback on Wednesday, though the currency stuck to a narrow range as investors took a wait and see approach to geopolitical risks and as domestic retail sales were largely in line with expectations.

The retail sales report, the only significant Canadian economic data on the calendar this week, showed sales rose 0.7 percent in May, slightly above expectations for a gain of 0.6 percent.

The data took the loonie briefly to a session high of C$1.0710 but the move was not sustained.

"On balance, (the report) was roughly in line with the market and what we were looking for, so it makes sense that U.S. dollar-Canadian dollar is about where it started the day," said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto.

"The choppiness out there probably reflects positioning more than anything else because really there weren't too many big drivers out there in the North American session today." The Canadian dollar ended the North American session at C$1.0729 to the greenback, or 93.21 U.S. cents, stronger than Tuesday's close of C$1.0736, or 93.14 U.S. cents.

Markets also continued to watch the events unfolding in Ukraine and the Middle East. Worries over rising tensions in the two regions had sapped investor sentiment earlier in the week, but markets had a more neutral tone to them on Wednesday.

Still, investors were likely to tread cautiously. Fighting in Gaza continued, while Ukraine said two of its fighter jets were shot down over rebel-held territory.

With the rest of the week likely to be quiet on the domestic front for the loonie, the currency could find itself range-bound in coming sessions. The Canadian dollar rallied 1.6 percent in June but has given back about a half a percent this month so far.

"So far this week there's been a couple opportunities to see a breakout of this narrow range we've been in for the past number of trading days but all those opportunities failed to inspire much," said Moore, pointing to the retail sales report and Tuesday's U.S. inflation data.

Friday's U.S. durable goods report could provide another opportunity to knock the currency pairing out of its range, though that would be a U.S. dollar-driven move, said Moore.

Canadian government bond yields recovered from earlier weakness and were higher across the maturity curve, though the yield on the benchmark 10-year was not far from a more than one-year low at 2.130 percent.

The two-year was off half a Canadian cent to yield 1.080 percent.

(Editing by Bernard Orr)

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