* Canadian dollar at C$1.2419, or 80.52 U.S. cents
* Bond prices mostly higher, long-dated bonds slip
By Alastair Sharp
TORONTO, June 30 (Reuters) - The Canadian dollar fell to its
weakest against the greenback in three weeks on Tuesday after
data showed a surprise economic contraction to start the second
quarter.
Canadian economic growth unexpectedly edged down 0.1 percent
in April, hurt by a decline in activity in mining and oil and
gas extraction, data from Statistics Canada showed.
The Canadian dollar was at C$1.2419 to the
greenback, or 80.52 U.S. cents, at 9:10 a.m. EDT (1310 GMT),
weaker than Monday's close of C$1.23.92, or 80.70 U.S. cents.
At one point it touched C$1.2434, its weakest level since
June 9, as traders calculated the Bank of Canada's likely policy
reaction.
"The numbers mitigate or argue against the (Bank of Canada
Governor Stephen) Poloz line that he's been highlighting over
recent months regarding the downturn being essentially
front-loaded or certainly likely to be contained by the end of
Q1," said Jeremy Stretch, head of foreign exchange strategy at
CIBC World Markets in London.
Stretch said the Canadian currency could weaken further and
even test C$1.30 if signs of a U.S. Federal Reserve rate hike in
September get stronger.
Canadian government bond prices were higher except at the
very long end, with the two-year price up 9 Canadian
cents to yield 0.519 percent and the benchmark 10-year
rising 2 Canadian cents to yield 1.735 percent. The
10- and 20-year issues slipped.
The Canada-U.S. two-year bond spread was -13 basis points,
while the 10-year spread was -61.2 basis points.
(Editing by Peter Galloway)