CANADA FX DEBT-C$ firms in U.S. holiday trade, outlook stays weak
* C$ at C$1.0587 vs US$, or 94.46 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Nov 28 (Reuters) - The Canadian dollar firmed modestly in quiet trade against the greenback on Thursday, though it stayed near four-month lows as a number of fundamental factors suggested the outlook for the currency is still weak. With U.S. bond and stock markets closed for the Thanksgiving holiday, investor focus turned to Friday's Canadian gross domestic product report, which is expected to show the economy grew at a 2.5 percent annualized rate in the third quarter. The only domestic news on the docket for Thursday was a report on Canada's current account deficit, which shrank in the third quarter, though the second-quarter deficit was substantially larger than previously reported. The loonie had little reaction to the data and consolidated through the session. After trading as weak as C$1.0603 on Wednesday, analysts say the currency faces resistance at C$1.0609, which was hit in July. "We more or less approached and retested the calendar high in dollar-Canadian dollar," said Jack Spitz, managing director of foreign exchange in Toronto. "Does this represent the high for the year once again, will it be rejected? I have a sense the GDP number tomorrow will go a long way in terms of whether or not that level does get rejected again." Some market watchers anticipate Friday's figures will come in above consensus of 2.5 percent growth, including National Bank, which forecasts 2.7 percent. The Canadian dollar ended the North American session at C$1.0587 to the greenback, or 94.46 U.S. cents, stronger than Wednesday's close of C$1.0595 or 94.38 U.S. cents. The Canadian currency has lost nearly 3 percent since late October, hurt by a retreat in the Bank of Canada's hawkish tilt and expectations that the U.S. Federal Reserve will soon move to withdraw some monetary stimulus. The policy shift from the Bank of Canada has markets expecting interest rates will stay at 1 percent into 2015. "We have the Canadian dollar weakening modestly over the next six months ... and then it starts to retrace that move in the second half of next year," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. Goldman Sachs earlier in the week suggested the Canadian dollar could fall to C$1.14 a year from now as commodity prices are likely to sag. The two-year bond was up 1-1/2 Canadian cents to yield 1.091 percent, while the benchmark 10-year bond rose 9 Canadian cents to yield 2.538 percent.
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