* C$ rallies as high as 86.66 U.S. cents
* Move triggered by strong Canadian trade data
* Bond prices down across the curve (Adds details)
TORONTO, May 12 (Reuters) - The Canadian dollar was higher versus the U.S. dollar on Tuesday morning but off the high it hit after data showed Canada's March trade surplus was more than double what the market had expected.
The Canadian dollar rallied as high as C$1.1540 to the U.S. dollar, or 86.66 U.S. cents, moments after the data, which put if comfortably above C$1.1658 to the U.S. dollar, or 85.78 U.S. cents, at Monday's close.
The boost in the currency followed a report that showed the trade surplus in March rose to C$1.11 billion, due largely to lower energy imports. [ID:nN11501985]
But the currency was unable to generate momentum and crack through the six-month high it hit during Monday's North American session.
By 9:35 a.m. (1335 GMT), the Canadian dollar unwound the post data gains, falling to C$1.1588 to the U.S. dollar, or 86.30 U.S. cents, from C$1.1583 to the U.S. dollar, or 86.33 U.S. cents, ahead of the trade report.
"Definitely good results for the trade, not outrageously good ... data is not having as material an impact as it had in the past but certainly a little bit positive," said Steve Butler, director of foreign exchange trading at Scotia Capital.
Butler said the Canadian dollar has some catching up to do with other commodity-linked currencies such as the Australian and New Zealand dollars.
Helping to cushion the Canadian dollar's turn lower was a rise in the price of oil, a key Canadian export, which hit $60 a barrel for the first time since November. [ID:nSIN472267]
Other factors keeping the Canadian dollar from slipping further were economic reports from Britain and China that bolstered the view that the global recession is easing, which lessened safe-haven demand for the U.S. dollar.
The next economic indicator that could influence the Canadian dollar is Friday's Canadian manufacturing survey for March.
BOND PRICES LOWER
Bond prices were pinned lower across the curve, relinquishing a chunk of the gains made during the previous session, as the trade data left investors with less interest in secure government debt.
North American equities opened higher as investors moved back into riskier assets after they tumbled in the previous session.
The benchmark two-year Canadian government was down 3 Canadian cents at C$100.30 to yield 1.101 percent, while the 10-year bond slipped 20 Canadian cents to C$105.35 to yield 3.126 percent.
The 30-year bond was off 55 Canadian cents at C$118.40 to yield 3.914 percent.
(Editing by Peter Galloway)
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