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CANADA FX DEBT-Canadian dollar lags G10 peers as greenback falls

 (Adds details throughout; updates prices)
    * Canadian dollar dips 0.2% against the greenback
    * Canadian factory sales likely fell 1.1% in April
    * Loonie trades in a range of 1.2029 to 1.2078
    * Canadian 10-year yield hits lowest in nearly 3 weeks

    By Fergal Smith
    TORONTO, May 25 (Reuters) - The Canadian dollar edged lower
against its broadly weaker U.S. counterpart on Tuesday as
domestic data showed a likely drop in  manufacturing sales in
April, with the currency remaining capped by last week's 6-year
high.    
    The loonie        was trading 0.2% lower at 1.2060 to the
greenback, or 82.92 U.S. cents, the biggest decline among G10
currencies. Last Tuesday, it touched its strongest level since
May 2015 at 1.2013, bolstered by higher commodity prices this
year and the Bank of Canada's more hawkish stance.
    Still, the current loss of momentum for the loonie could be
temporary.
    "We continue to target a deeper push below 1.20 in the
coming months," strategists at Scotiabank, including Shaun
Osborne, said in a note.
    "There appears to be little concern at the central bank
about the CAD and the message is clear that the central bank
will keep policy settings aligned with the economy as it works
toward its goals," the strategists said.
    Canadian factory sales likely fell 1.1% in April from March,
giving back some of the previous month's increase, a flash
estimate from Statistics Canada showed.                     
    The U.S. dollar        hit 4-1/2 month lows against a basket
of peers as markets seemed to accept U.S. Federal Reserve
arguments that monetary policy should stay easy because
inflationary forces are broadly weak.                 
    The price of oil       , one of Canada's major exports,
settled 2 cents higher at $66.07 a barrel, supported by rising
demand from the approach of the Northern Hemisphere's summer
driving season and lifting of coronavirus restrictions.
                
    Canadian government bond yields were lower across a flatter
curve. The 10-year             hit its lowest since May 7 at
1.478% before edging up to 1.480%, down 6.3 basis points on the
day.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and Dan
Grebler)
  
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