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* C$ flat at C$0.9849 vs US$, or $1.0153
* Hit session low after weak data
* Bond prices little changed
By Claire Sibonney
TORONTO, Dec 14 (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Friday as investors looked past surprisingly weak manufacturing data and clung to hopes that a U.S. budget deal would be resolved by the end of the year.
Canadian manufacturing unexpectedly plunged by 1.4 percent in October from September, the biggest drop in nine months, on weakness in major sectors such as motor vehicles and primary metals.
The currency briefly weakened to a session low after the numbers, before returning to trade little changed.
"We did have a pretty soft manufacturing report but it really did very little to weaken off the currency," said Mark Chandler, head of fixed income and currency strategy at RBC Capital Markets.
"It's just a backdrop of generally better risk appetite for the week as a whole and the market hasn't been able to break that," Chandler added, noting the broader confidence in the market despite the lack of progress by U.S. politicians in ongoing fiscal negotiations.
U.S. President Barack Obama and House of Representatives Speaker John Boehner held a "frank" meeting Thursday to try to break an impasse in negotiations over the "fiscal cliff," tax hikes and spending cuts set to kick in early in 2013.
Markets were also digesting data that showed U.S. consumer prices fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path as it nurses the economy back to health.
At 9:28 a.m. (1428 GMT), the Canadian dollar stood at C$0.9849 versus the U.S. dollar, or $1.0153, compared with Thursday's finish at C$0.9848 versus the U.S. dollar, or $1.0154.
After the manufacturing data, the currency briefly weakened to C$0.9852 versus the greenback, or $1.0150, from around C$0.9845, or $1.0157 before the release.
RBC expected the day's range to hold between C$0.9820 and C$0.9860.
Canadian government bond prices were little changed across the curve, with the two-year bond flat to yield 1.120 percent and the benchmark 10-year bond was unchanged to yield 1.799 percent.