The Canadian dollar retreated against the greenback on Thursday after touching a two-year high, as its U.S. counterpart rebounded on a slew of U.S. data that indicated an acceleration in growth during the second quarter.

The U.S. dollar also firmed against the euro, the British pound and other currencies after troughing earlier following a more dovish-than-expected U.S. Federal Reserve policy statement on Wednesday.

"Today it's taking part in the broad [U.S.] dollar corrective move," said Bipan Rai, executive director and senior macro strategist at CIBC Capital Markets. "So I don't think it's anything endogenous to Canada itself."

At 4:00 p.m. ET, the Canadian dollar was trading at $1.2558 to the greenback, or 79.63 cents US, down 0.9 per cent.

The currency, which rallied to more than two-year highs following the Fed statement, traded between $1.2414 and  $1.2575.

A combination of a weak greenback, strong Canadian economic data and rate hike expectations have propelled the loonie some 10 per cent over the last three months.

Bond yields climbed to multi-year highs earlier this week, while U.S.-Canada two-year bond yields' spread has narrowed sharply in recent weeks.

Prices of oil, a key Canadian export, have also climbed to near eight-week highs, though analysts say the traditional correlation between the currency and oil have broken down recently.

Given the currency's surge in recent months and expectations the Bank of Canada will raise interest rates one more time this year fully priced into the market, analysts do not expect the Canadian dollar to rally much further.

"Judging by the price action on the technical chart, we do think there's more scope for further correction in the U.S. dollar," said Rai.

In the United States, the greenback bounced after data showed new orders for U.S.-made capital goods unexpectedly fell in June. Gut shipments showed a fifth straight monthly increase. Other data showed a sharp narrowing in the goods trade deficit in June, and increases in both retail and wholesale inventories. 

Canadian government bond prices were mostly lower across the maturity curve, with the two-year price down 1.5 cents to yield 1.3 per cent and the benchmark 10-year falling 26 cents to yield 1.999 per cent. The Canada-U.S. two-year bond spread stood at -6.7 basis points, while the 10-year spread was at -31.9 basis points.