CANADA FX DEBT-C$ rises in subdued trade; growth prospect drag

* C$ rises to 97.67 U.S. cents

* Hit 6-wk high Monday when most Canadian markets closed

* Bond prices edge up with U.S. Treasury notes

By Ka Yan Ng

TORONTO, Aug 3 (Reuters) - The Canadian dollar rose against a broadly softer U.S. currency on Tuesday, but retreated from a six-week high on growth concerns in the United States, Canada's biggest trading partner.

The currency briefly fell after disappointing data fanned worries about the economic recovery in the United States, which buys about three-quarters of Canadian exports.

U.S. consumer spending and incomes were flat in June while home purchase contracts tumbled to a record low, suggesting an anemic economic recovery for the remainder of this year. [ID:nN03143233]

The Canadian dollar CAD=D4 ended at C$1.0239 to the U.S. dollar, or 97.67 U.S. cents, up from C$1.0283 to the U.S. dollar, or 97.25 U.S. cents, at Friday's close. Most Canadian markets were closed on Monday for the Civic Holiday.

"There's not a lot of movement in the spot rate. Coming back from the long weekend, there's still a fair amount of focus on the U.S. economic situation," said Shaun Osborne, chief currency strategist at TD Securities. "Essentially we're still stuck in a trading range."

The U.S. data also deepened negative sentiment for the greenback after Federal Reserve Chairman Ben Bernanke said on Monday that the United States has yet to recover fully and monetary policy must remain accommodative. [ID:nN02276865]

Speculation that the Fed may consider pumping more money into the economy through new bond purchases weighed on the greenback, and other assets denominated in U.S. dollars. [FRX/] [US/]

Most Canadian financial markets were closed on Monday for the holiday weekend, but the Canadian dollar shot as high as C$1.0204 to the U.S. dollar, or 98 U.S. cents, its highest level since June 22.

"It's been somewhat subdued since," said Shane Enright, executive director, foreign exchange sales, at CIBC World Markets, saying the currency was making gains but held back because U.S. growth prospects seem to be diminishing.

July employment reports from Canada and the United States on Friday will be the main event market event this week, and could go a long way to determining views on the economic recovery in the two countries.

The first look at Canada's third-quarter jobs data is expected to yield a modest gain of 15,000 after impressive job creation in the first half of the year brought the labor market close to its pre-recession peak. The unemployment rate is expected to remain steady at 7.9 percent. [ID:nN30270191]

The reports may also prompt the Canadian dollar to exit its recent trading range of C$1.03-C$1.05 to the U.S. dollar. Activity was quiet on Tuesday, with the currency in a 55 basis point range.

"Given the focus on the data we have later in the week, we may well trade in a bit of a range until we get the employment data," said Osborne.

BONDS PRICES UP

Canadian government bond prices edged up with U.S. Treasury issues as investors mulled the Fed chairman's comments from Monday, and as disappointing corporate results weakened U.S. equity markets.

The soft U.S. data also helped keep a bid to less-risky assets such as government debt. There were no Canadian releases on Tuesday.

The two-year bond CA2YT=RR climbed 6 Canadian cents to yield 1.431 percent, while the 10-year bond CA10YT=RR added 5 Canadian cents to yield 3.107 percent.

Canadian bonds underperformed U.S. issues across most of the curve, except in the three-year maturity. The Canadian 10-year bond was 19.7 basis points above the comparable U.S. bond, compared with 14.5 3 basis points in the previous session. (Reporting by Ka Yan Ng; editing by Rob Wilson)