C$ loses momentum after US GDP data

TORONTO: The Canadian dollar was little changed on Thursday, giving up much of its earlier gains after second-quarter growth south of the border was revised higher, and as investors looked ahead to key domestic economic data at the end of the week.

Still, the loonie is up about 0.8 percent for the week so far, fueled by a sharp rise in Wednesday's session and putting it on track for its best week since late June.

Analysts said there are a number of factors behind the currency's recent strength, including technical momentum, fund flow speculation stemming from Burger King's plans to buy Tim Hortons, and investor repositioning heading into the end of the month.

Attention was also increasingly turning to Friday's gross domestic product report, with Canadian economic growth forecasted to pick up to 2.7 percent in the second quarter, bouncing back from a slowdown in the first three months of the year.

Analysts say there is the potential for the figures to come in higher than expected, which would support the loonie.

Even so, the loonie's recent strength is not expected to last.

"This is the dip that most US dollar bulls have been waiting for and, as such, we don't see this as the start of a new trend of strength in the loonie," said Bipan Rai, director of foreign exchange strategy at CIBC World Markets in Toronto.

"It's the other way around, really, we expect this move to reverse as we head into September and markets begin looking toward the Federal Reserve tightening again."

The Canadian dollar was at C$1.0853 to the greenback, or 92.14 US cents, a touch stronger than Wednesday's close of C$1.0855, or 92.12 US cents.

The loonie came off its high for the session at C$1.0837 shortly after the US data was released.

Data earlier on Thursday that showed Canada's current account deficit narrowed slightly in the second quarter elicited a muted reaction from the currency.

Investors were also keeping an eye on the risk aversion present in broader markets after Ukraine accused Russia of bringing troops into the southeast of the country.

Canadian government bond yields were lower across the board, with the yield on the benchmark 10-year at its lowest level since May of last year at 1.994 percent. The two-year up half a Canadian cent in price to yield 1.101 percent.