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* C$ edges up to 99.07 U.S. cents
* Long-dated bonds stay lower after U.S. trade data
* Get used to upward pressure on C$: Flaherty (Updates to close)
By Ka Yan Ng
TORONTO, Dec 10 (Reuters) - The Canadian currency eked out a small gain against the U.S. dollar on Friday, trapped in the tightest trading range in several weeks and uninspired by firmer equity markets and data that showed the country's trade deficit shrank in October.
The currency remained stuck in its recent narrow band, moving in just a 21-point range during the North American session. The range has compressed in each of the last three sessions and it was the most compact span since Nov. 29 when the currency traded in a 48-point range.
The Canadian dollar CAD=D4 finished at C$1.0094 to the greenback, or 99.07 U.S. cents, up from Thursday's close at C$1.0105 to the U.S. dollar, or 98.96 U.S. cents. For the week, the Canadian dollar fell 0.6 percent.
"The data this morning was fairly positive for Canada in the sense that exports are looking relatively strong. We have commodities very close to where they closed the day before and equities slightly stronger," said Camilla Sutton, chief currency strategist at Scotia Capital.
"So not a lot of real movement out of Canada. We're just sticking around parity but unable to really break through. We need a material catalyst to push us through the C$0.9980 level on a sustainable basis."
That level above parity was reached on Oct. 14, one of a handful of times that the Canadian dollar has returned to a one-for-one level with the U.S. dollar since April. There was also a brief run in November where the currency struggled to hold above par.
With no top tier domestic data expected next week, attention will look to the United States for a possible catalyst, notably the Federal Reserve's interest rate decision and November reads on retail sales and the consumer price index. ECONUS
In economic news on Friday, higher exports helped cut Canada's October trade deficit to a smaller than expected C$1.71 billion from a revised C$2.31 billion in September, Statistics Canada reported.
Market analysts had predicted a deficit of C$2.1 billion in October. In recent months the high Canadian dollar and weak U.S. economy have cut demand in the United States, Canada's biggest export market by far. [ID:nN10267094]
Meanwhile, Finance Minister Jim Flaherty told Reuters Insider on Friday that Canada needs to get used to upward pressure on its dollar. [ID:nN10294555] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters Insider show on: link.reuters.com/vet59q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The currency's muted reaction to Friday's data was probably offset by the unexpectedly large contraction in the U.S. trade deficit, analysts said. Toronto's main stock index advanced 0.55 percent in a broad-based rally.
Separately, data from the Commodity Futures Trading Commission showed speculators added to bets in favor of the Australian and Canadian dollars. [ID:nN10116786]
BONDS HOLD LOWER
Long-dated government bond prices mirrored the drop in comparable U.S. Treasuries after data showed the U.S. trade deficit narrowed much more than expected in October.
The 10-year bond CA10YT=RR fell sharply, down 61 Canadian cents to yield 3.320 percent, as the smaller than expected trade deficit could boost estimates of U.S. fourth-quarter economic growth.
"(Yields) quite quickly jumped on the story of stronger U.S. growth. To be honest, it's probably not worth that much more in terms of additional growth in U.S. numbers, but there just seems to be a bias in the market of that," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
The U.S. trade gap totaled $38.7 billion, compared with a forecast of about $43.6 billion, and down from a revised estimate of $44.6 billion for September. [ID:nN09288102]
The two-year bond CA2YT=RR was down 6 Canadian cents to yield 1.724 percent. Canadian government bonds put in mixed performance against their U.S. counterparts with the front- and back-end of the curve underperforming. The belly of the curve outperformed.