CANADA FX DEBT-Canadian dollar strengthens to two-week high against out of favor greenback

By Fergal Smith

TORONTO, July 4 (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Thursday as investors took advantage of market gyrations following the release of U.S. employment data to sell the greenback.

The loonie CAD= was trading 0.2% higher at 1.3560 per U.S. dollar, or 73.75 U.S. cents, after touching its strongest intraday level since June 17 at 1.3557.

Stronger-than-expected U.S. jobs data helped lift the U.S. dollar .DXY against a basket of major currencies but the greenback was unable to hold on to the gains it made against the Canadian dollar.

"The market remains firmly biased to sell rallies in the greenback," said George Davis, chief technical strategist at RBC Capital Markets.

The U.S. dollar will remain weak over the coming months, a Reuters poll of FX analysts forecast, caught in a tangle of mounting U.S. debt concerns, erratic tariff policies and rising interest rate cut expectations.

Canada's trade deficit narrowed to C$5.9 billion ($4.34 billion) in May after hitting a record level of C$7.6 billion in April. Exports increased 1.1% on a monthly basis after slumping 11% in April as higher shipments of gold to the United Kingdom offset reduced trade with the United States.

"The Canadian dollar is paying little heed to domestic fundamentals, and is instead simply following most of its global rivals higher against the greenback," said Karl Schamotta, chief market strategist at Corpay.

The price of oil CLc1, one of Canada's major exports, fell 0.7% to $66.95 a barrel, giving back some of the previous day's gains.

Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year CA10YT=RR was up 2.8 basis points at 3.387%.