CANADA FX DEBT-C$ sheds nearly a cent on soft Canadian GDP
* Canadian dollar at C$1.1286 or 88.61 U.S. cents * Bond prices mostly weaker across the maturity curve By Solarina Ho TORONTO, Oct 31 (Reuters) - The Canadian dollar shed nearly a cent against its U.S. counterpart on Friday and dropped to its weakest level in more than a week after data showed the country's economy unexpectedly shrank in August for the first time in eight months. Real gross domestic product fell 0.1 percent in August, hurt by plant maintenance in the oil and gas industry that slowed production and by a drop in manufacturing activity. "It's just a bit of an additional headwind. It doesn't quite buy into the narrative that we're hoping to see," said David Tulk, chief Canada macro strategist at TD Securities, who said the GDP drop was not too surprising given fairly weak economic data globally for August. "Our expectation is that it will reassert itself in September and going into the final quarter of the year." At 9:21 a.m. (1321 GMT), the Canadian dollar was at C$1.1286 to the greenback, or 88.61 U.S. cents, significantly softer than Thursday's close of C$1.1196, or 89.32 U.S. cents. In the United States, consumer spending fell for the first time in eight months in September, but the slowdown was expected to be temporary as other data showed the biggest increase in wages in more than six years in the third quarter. "It's sort of a perfect storm, where you get the weakness in the Canadian economy ... But also on the U.S. side, you have the employment cost index that was stronger than people had thought," Tulk said. "That gives you your perfect storm, insofar as you see that potential momentum in wages under the surface in the United States, which brings the Fed arguably closer to taking rates higher." Earlier this week, the U.S. central bank said it was ending its monthly bond purchase program and adopted a more hawkish tone on the economy. Canadian government bond prices were mostly weaker across the maturity curve, but the two-year was unchanged with a yield of 1.038 percent. The benchmark 10-year lost 13 Canadian cents to yield 2.062 percent. (Reporting by Solarina Ho; Editing by Peter Galloway)
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