* C$ at C$0.9862 vs US$, or $1.0140 * C$ touches C$0.9858, strongest since Oct. 19 * Canada posts narrower-than-expected trade deficit * Bond prices ease across the curve By Solarina Ho TORONTO, Dec 11 (Reuters) - The Canadian dollar ended firmer against the U.S. currency for the sixth straight session on Tuesday after briefly touching its strongest level in nearly two months following data that showed Canada's trade deficit shrank unexpectedly in October. Canada's trade deficit was C$169 million ($171 million) in October from a revised C$1.01 billion deficit in September as imports fell 1.2 percent, while higher prices and volumes drove up exports 1.0 percent. Analysts expected a shortfall of C$1.2 billion. "The headline was a little better than the components. I think the market shrugged it off pretty quickly. I don't know that it was enough news to make you want to run out and buy the Canadian dollar," said Darcy Browne, managing director of Capital Markets Trading at CIBC World Markets. Imports fell to a 15-month low, an indication the economy is still struggling to cope with weak foreign markets and other challenges. "Whether the trade deficit remains low would be more a function of the recovery in the U.S. and the global economy," said Paul Ferley, assistant chief economist at Royal Bank of Canada. The numbers contrasted with U.S. trade data, which showed a wider deficit in October. Exports suffered their biggest drop in nearly four years, a sign slowing global demand was spilling into the already struggling U.S. economy. "I think the impact (on the Canadian dollar) could be fairly short-lived until we get further confirmation of indications of growth bouncing back here in Canada for the final quarter of this year," said Ferley. The Canadian dollar finished at C$0.9862 versus the greenback, or $1.0140, slightly firmer than Monday's session close of C$0.9870, or $1.0132. It touched a session high after the Canadian trade data was released before paring gains. Canada's dollar hit C$0.9858, or $1.0144, its strongest since Oct. 19, but was still stuck in a narrow range between $0.9858 and $0.9880. The currency has made steady inroads against its U.S. counterpart since Friday, when the Canadian government approved two big international takeovers. It underperformed against most other major currencies, however, including the euro, which rallied against the U.S. dollar as surprisingly strong German economic sentiment and optimism the United States will avoid a fiscal crisis encouraged investors to broadly embrace risk. The Canadian dollar did not react to Bank of Canada Governor Mark Carney's first speech since his surprise appointment as Bank of England governor. Carney, who has signaled for months that the central bank's next interest rate move will be an increase, said on Tuesday he will not rush through any policy decisions before he leaves in June to head the Bank of England. Going forward, investors are focused on the Federal Reserve meeting and "fiscal cliff" talks in the United States to avoid $600 billion of spending cuts and tax increases set to begin in the new year. When the Fed concludes its meeting on Wednesday, the central bank is expected to extend its asset-purchase scheme and commit to buy $45 billion of U.S. debt each month. "I think the market's just watching equities and all the developments on the wires relating to the fiscal cliffs and as the equities rally, the correlation still holds with the S&P and the Canadian dollar," said Browne. He added that the next level to watch for was around C$0.98. "Again, we're hitting technical targets for the Canadian dollar and the S&P and we'll see if it has enough momentum to push out through another leg. It's starting to shape up like it might." Canadian government bond prices eased across the curve, with the two-year bond lost 3.5 Canadian cents to yield 1.076 percent, and the benchmark 10-year bond gave back 27 Canadian cents to yield 1.730 percent.