CANADA FX DEBT-Canadian dollar edges lower as focus turns to domestic GDP data

BY Reuters | ECONOMIC | 12:52 PM EDT

* Canadian dollar falls 0.1% against the greenback

* Trades in a range of 1.3800 to 1.3821 per U.S. dollar

* Price of oil declines 2.6%

* Bond yields rise across the curve

By Fergal Smith

TORONTO, May 26 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday as investors weighed comments by a senior Bank of Canada policymaker and looked ahead to quarterly GDP data at the end of the week.

The loonie was trading 0.1% lower at 1.3805 per U.S. dollar, or 72.44 U.S. cents, after trading in a range of 1.3800 to 1.3821. On Friday, the currency touched a near six-week low at 1.3824.

Economists expect first-quarter GDP data, due on Friday, to show the economy growing at an annualized rate of 1.5%.

"The Canadian dollar remains stubbornly range-bound ahead of Friday's first-quarter gross domestic product report, which is expected to show the economy staging a relatively modest recovery after contracting at the end of last year," Karl Schamotta, chief market strategist at Corpay, said in a note.

"Paired with evidence of soft labour markets and weak demand-led inflation, this growth backdrop should give the Bank of Canada room to await clearer evidence of a shift in economic direction before moving again."

Structural changes in the labor market were making the Bank of Canada's job more complicated, Deputy Governor Nicolas Vincent said, adding that if the central bank reacted wrongly, inflationary pressures could rise.

Investors expect the BoC to leave its benchmark interest rate on hold at 2.25% on June 10, swap market data showed. The U.S. dollar rose against a basket of major currencies and the price of oil clawed back some earlier declines to trade 2.6% lower at $94.05 a barrel, as U.S. military strikes in Iran added to uncertainty over whether a deal would be reached soon to end the war.

Oil is one of Canada's major exports.

Canadian bond yields moved higher across the curve. The 10-year was up 1.7 basis points at 3.484% after touching during Monday's session its lowest level since April 22 at 3.448%. (Reporting by Fergal Smith, editing by Deepa Babington)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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