CANADA FX DEBT-C$ firms as market looks ahead to inflation data
* Canadian dollar at C$1.0951 or 91.32 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Feb 18 (Reuters) - The Canadian dollar firmed against the greenback on Tuesday, extending this month's bounce-back from January's heavy slump, while investors looked ahead to inflation data later in the week. The currency was helped by a decline in the U.S. dollar after economic data south of the border raised concerns that recent signs of weakness in the U.S. economy point to deeper problems than just weather-related issues. The loonie had little reaction to data that showed foreigners reduced their holdings of Canadian securities for the first time in six months in December. Analysts said the report had little impact on trading because the December figures were too far in the past. "We already knew in a way that flows into Canadian assets had been slowing quite meaningfully over the past year," said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York. "I see it more as a return to normal, where Canada is no longer the darling of financial markets where everybody wanted to accumulate Canadian bonds," St-Arnaud said. "In a way, it removes a lot of support we've seen for the Canadian dollar in the past three years. It will be harder now for the Canadian dollar to go back to parity." The Canadian dollar ended the North American session at C$1.0951 to the greenback, or 91.32 U.S. cents, stronger than Friday's close of C$1.0983, or 91.05 U.S. cents. Many North American trading desks were closed on Monday for Canadian and U.S. holidays. The Canadian dollar fell sharply in January, touching 4-1/2 year lows but the currency has been able to recover some ground this month. The currency is up about 1.6 percent against the U.S. dollar this month, though that does not completely offset January's more than 4 percent drop. Market focus was on the Canadian inflation report for January due on Friday. The Bank of Canada has expressed concern about weak inflation, and investors will look at the report for further insight on the potential path of monetary policy, which has been a major driver of the currency. Investors will get a look at Canadian retail sales figures for December on the same day. "We're range-bound until the end of the week, in my opinion, where we get some more domestic data to really give us a catalyst to where this move goes," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. Another potential driver later this week will be the release of the minutes from the U.S. Federal Reserve's latest policy-setting meeting. The minutes will be parsed for clues on what factors might prompt the central bank to pause in the reduction of its economic stimulus program. Barring any surprises from the Fed release, the loonie will likely be stuck in a range between C$1.10 and the low C$1.09 area until the end of the week, Smith said. Canadian government bond prices were higher across the maturity curve, with the two-year up 3.3 Canadian cents to yield 0.996 percent and the benchmark 10-year up 17 Canadian cents to yield 2.446 percent.