CANADA FX DEBT-C$ gains after data shows growth in August
* C$ touches high of 98.33 U.S. cents
* Currency gets boost from domestic GDP data, weak US$
* Bond prices edge higher
By Jennifer Kwan
TORONTO, Oct 29 (Reuters) - The Canadian dollar firmed to a session high against its U.S. counterpart on Friday morning after data showed that Canada's economy resumed growing in August after a brief downturn in July.
Growth was bolstered by wholesale trade, manufacturing and oil and gas extraction, Statistics Canada said on Friday. Gross domestic product by industry climbed 0.3 percent in the month, as expected in a Reuters poll, compared with a 0.1 percent contraction in July. [ID:nN29434455]
The combination of the Canadian data and a softer U.S. dollar, following the release of U.S. growth data, pushed up the Canadian currency, said Camilla Sutton, chief currency strategist at Scotia Capital.
"The biggest fear for Canada is that we soften on the back of the U.S. It was all fairly positive and the Canadian dollar has rallied on the back of it," she said.
The currency CAD=D4 firmed to C$1.0170 to the U.S. dollar, or 98.33 U.S. cents after the data was released. At 8:59 a.m. (1259 GMT), it stood at C$1.0174 to the U.S. dollar, or 98.29 U.S. cents, up from Thursday's close at C$1.0215 to the U.S. dollar, or 97.90 U.S. cents.
U.S. data showed economic growth edged up as expected in the third quarter but not enough to chip away at high unemployment or change perceptions of more monetary easing from the Federal Reserve next week. [ID:nN28207235]
"There's a lot of risk going into the FOMC (Federal Open Market Committee)," Sutton said of the U.S. central bank's policy-setting meeting next week.
"The potential was that we saw a stronger than expected GDP print and then that would create fears that the FOMC wouldn't be as aggressive as the market thinks they're going to be right now and that would cause U.S. dollar short covering. With the relief of that out of the way, the U.S. dollar is weakening off again."
Investors have been reassessing their estimates of how much money the Federal Reserve may commit to a second round of monetary stimulus -- widely dubbed "QE2" -- when it meets. [FRX/]
Canadian government bond prices were flat to higher with the two-year bond CA2YT=RR up 1 Canadian cent to yield 1.427percent, while the 10-year bond CA10YT=RR gained 13 Canadian cents to yield 2.857 percent. (Reporting by Jennifer Kwan, Editing by Chizu Nomiyama)
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