CANADA FX DEBT-C$ firms with stocks, commodities; eye on EU summit

* Currency ends up at C$1.0240 vs US$ or 97.66 U.S. cents
    * C$ higher with North American equities, commodities
    * Bond prices slip across curve

    By Claire Sibonney
    TORONTO, June 26 (Reuters) - Canada's dollar edged up
against its U.S. counterpart on Tuesday, tracking North American
equities and commodities higher, but the gains were seen as
fragile before a European Union debt crisis summit this week.
    Wall Street marked a modest rebound on the back of upbeat
data on home prices, but trading is expected to be volatile
ahead of the two-day meeting of EU leaders that begins Thursday.
    "The highest correlation for the Canadian dollar right now
is the U.S. stock market. Throughout this year it's been higher
than any other currency pair," said Adam Button, currency
analyst at ForexLive in Montreal.
    Although investors do not have high hopes about the EU
summit, any progress made at the meeting in terms of heightening
cooperation to tackle the region's 30-month long debt crunch
co u ld bring back appetite for risky assets.
    "It will be a watershed moment for the rest of summer
trading," added Button. "This will set us up for a long period
of disappointment and Canadian dollar weakness or potentially
some stability and optimism which would lead to the Canadian
dollar back over parity."
     The Canadian currency ended the North American
session at C$1.0240 to the greenback, or 97.66 U.S. cents,
stronger than Monday's finish at C$1.0292 to the greenback, or
97.16 U.S. cents.
    In the short-term, Button said the currency will most likely
trade between C$1.01 versus the U.S. dollar, or 99 U.S. cents,
and C$1.04, or 96.15 U.S. cents.
    The Canadian dollar has had a bumpy ride so far this year,
swinging from its high above parity with the greenback at $1.02
in April to its low below 96 U.S. cents a few weeks ago.
    Some analysts expect an even sharper depreciation, despite
the fact that the currency is down less than 1 percent year to
    In a research note on Tuesday, Capital Economics predicted
the Canadian dollar will weaken to 92 U.S. cents by the end of
this year and 86 U.S. cents by the end of 2013.
    The research firm said the forecast was based partly on the
prospect of further declines in commodity prices.
    Canadian bond prices retreated across the curve, largely
mimicking U.S. Treasuries, as investors pushed for price
concessions in auctions of new U.S. debt this week. 
    The two-year Canadian government bond fell 4
Canadian cents to yield 1.01 percent, while the benchmark
10-year bond lost 19 Canadian cents to yield 1.748