CANADA FX DEBT-C$ hits 6-week low as rate expectations boost greenback

* Canadian dollar at C$1.2526, or 79.83 U.S. cents
    * Bond prices mixed

    By Andrea Hopkins
    TORONTO, May 28 (Reuters) - The Canadian dollar weakened
through a key psychological barrier to a six-week low on
Thursday as the U.S. dollar benefited from expectations that
U.S. interest rates will rise later this year, while Canadian
rates are seen staying put.
    Signals from the Bank of Canada on Wednesday that it is in
no hurry to raise rates helped push the Canadian currency
through the C$1.25 barrier on Thursday, but the greenback was on
a roll against major currencies regardless. 
    "The U.S. dollar is making some pretty reasonable strides
across the board and correspondingly we've seen that C$1.25
level giving way," said Jeremy Stretch, head of foreign exchange
strategy at CIBC World Markets in London.
    "It seems that the path of least resistance is still firmly
biased in favor of the U.S., so I think we are likely to try to
squeeze to the topside, and the key level on the topside is
probably C$1.2570," he added.
    Since breaking weaker than C$1.20 to the U.S. dollar earlier
in May, the loonie has steadily lost ground.
    At 9:46 a.m. EDT (1346 GMT), the Canadian dollar 
was at C$1.2526 to the U.S. dollar, or 79.83 U.S. cents, weaker
than Wednesday's official close of C$1.2459, or 80.26 U.S.
cents, and close to its weakest point since April 15. 
    Stretch said market focus will be on Canadian gross domestic
product data for the first quarter, due out on Friday. Analysts
polled by Reuters expect a 0.3 percent annualized rate of growth
for the first three months of 2015, but Stretch said a
bigger-than-expected number could support the currency.
    "That might provide some respite," he noted, adding that
higher oil prices would help the loonie as well.
    Oil prices steadied on Thursday after a two-day slide as
investors awaited data from the U.S. Energy Information
Administration (EIA) to see how U.S. oil production was
responding to a recent surge in prices. 
    The Bank of Canada said Wednesday it will hold its benchmark
rate steady. But some analysts questioned whether economic
recovery in the United States will deliver the strong benefits
to Canada that bank Governor Stephen Poloz said he expects from
an export rise. 
    Canadian government bond prices were mixed across the
maturity curve. The two-year fell 0.5 Canadian cent
to yield 0.634 percent, while the benchmark 10-year 
fell 5 Canadian cents to yield 1.672 percent.

 (Reporting by Andrea Hopkins; Editing by Peter Galloway)