CANADA FX DEBT-Canadian dollar steadies near 7-month high as short positions rise

By Fergal Smith

TORONTO, May 26 (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Monday after posting a seven-month high earlier, as global trade tensions eased and after data showed speculators growing more vulnerable to a short squeeze in the currency.

The loonie CAD= was trading nearly unchanged at 1.3734 per U.S. dollar, or 72.81 U.S. cents. Earlier, it touched its strongest intraday level since October 9 at 1.3687.

Activity was likely more subdued than usual with financial markets in the United States and Britain closed for public holidays.

Speculators have raised their bearish bets on the Canadian dollar to a six-week high, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of May 20, net short positions had increased to 103,861 contracts from 82,156 in the prior week. 1090741NNET

Recent gains for the currency "may put some of these freshly minted CAD shorts under a little pressure soon," Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note.

The euro hit a one-month high against the U.S. dollar after U.S. President Donald Trump backed down from threatened 50% duties on European Union shipments from June 1, as the bloc asked for time to "reach a good deal."

The price of oil CLc1, one of Canada's major exports, was barely changed at $61.52 a barrel.

Canadian factory sales fell 2% in April from March, weighed by lower sales in the petroleum and coal product subsector and the motor vehicle industry group, a preliminary estimate showed.

First-quarter gross domestic product data is due on Friday, which could guide expectations for next week's Bank of Canada interest rate decision. Economists expect growth to slow to an annualized rate of 1.7% from 2.6% in the previous quarter.

Canadian bond yields eased across a flatter curve. The 10-year CA10YT=RR was down 4.5 basis points at 3.306%.