CANADA FX DEBT-Canada trade surplus data gives C$ a break from selloff

Reuters

* Canadian dollar at C$1.0913 or 91.63 U.S. cents * Bond prices mixed across the maturity curve (Adds details, quotes, updates prices) By Leah Schnurr TORONTO, Aug 6 (Reuters) - The Canadian dollar firmed against the greenback on Wednesday, snapping back from a three-month low hit in early trade, after data showed the country's trade surplus widened unexpectedly in June as exports rose to a record high.

The gain gave the loonie some relief from a selloff that had left it staggering over the past week and a half as optimism over a U.S. economic recovery fueled a preference for the U.S. currency.

Investors were also keeping an eye on geopolitical tensions after NATO said Russia has massed combat-ready troops on Ukraine's eastern border.

Concern that the crisis in the region could escalate made markets cautious early in the day, but the Canadian dollar shrugged off the concerns after the trade report showed Canada's surplus climbed to a 2-1/2 year high in June. The figures surpassed expectations for a flat trade balance.

"That's quite positive for Canada in the sense that it ties back to the Bank of Canada and how they continue to follow exports as a way to boost the economy," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto.

"It's one checkmark you can add to the Canadian dollar side, whereas for the most part, it's been checkmarks on the U.S. dollar side, just because the U.S. dollar story has been so strong." The Canadian dollar ended the North American session at C$1.0913 to the greenback, or 91.63 U.S. cents, stronger than Tuesday's close of C$1.0960, or 91.24 U.S. cents. The loonie's session low was C$1.0986, its lowest level since early May.

The Canadian dollar's recent rout reversed the gains it made in a strong rally through June. The currency is down more than 2 percent since the beginning of July.

Analysts said Wednesday's gain was unlikely to change the overarching trend of more weakness for the Canadian dollar in the longer term.

A Reuters poll of analysts released on Wednesday showed the loonie is forecast to be at C$1.12 in a year from now.

In the near term, the C$1.09 area is a level that investors will focus on as potentially providing a floor for U.S. dollar-Canadian dollar, while C$1.0990 and C$1.10 will be resistance points for the pairing, said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto.

"It does have that feel now that we're inevitably moving higher even though things aren't dramatically different than they were prior to this move," he said of the pairing.

Canadian government bond prices were mixed across the maturity curve, with the two-year down 1 Canadian cent to yield 1.084 percent, while the benchmark 10-year was up 1 Canadian cent to yield 2.113 percent.

(Editing by Peter Galloway)

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