March 1, 2013 / 2:34 PM / 4 years ago

CANADA FX DEBT-C$ makes gains after in-line Canada GDP data

* C$ at C$1.0309 to US$, or 97.00 U.S. cents

* Currency helped by GDP data; weak but as forecast

* C$ early hit C$1.0343, weakest since June

By Alastair Sharp

TORONTO, March 1 (Reuters) - The Canadian dollar pared early losses and traded stronger on Friday after domestic economic growth data for December and the fourth quarter came out in line with forecasts.

The Canadian economy chalked up another quarter of weak growth at the end of 2012, and shrank 0.2 percent in December for its first monthly decline since February 2012.

But given that economists have sharply lowered their expectations in recent weeks after a string of dour data, the currency actually strengthened slightly after the numbers.

"There may have been some players that were bracing for an even worse number than this and the possibility of a slight decline," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

"That didn't happen, so that may be contributing to a bit of a bounce. But I wouldn't think the reaction will be all that long lived as the number just seems too close to expectations."

At 9:16 a.m. (1416 GMT) the Canadian dollar was trading at C$1.0309 to the greenback, or 97.00 U.S. cents, compared with C$1.0334 just before the GDP data was released and $1.0314 at Thursday's North American close.

The currency fell off sharply overnight, hitting C$1.0343, its weakest level since June 28.

The loonie, as Canada's currency is colloquially known, has weakened sharply against the U.S. dollar since mid-February, when the pair were changing hands at equal value. It is on track for a 1 percent slip this week.

"The dollar has already taken a pretty severe licking in recent days and weeks in any event, and I don't think this will necessarily pile on," said Doug Porter, chief economist at BMO Capital Markets.

The price of the two-year bond slipped after the data to trade flat with a yield of 0.953 percent, while the benchmark 10-year bond also pulled back but was still up 18 Canadian cents to yield 1.818 percent.

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