CANADA FX DEBT-C$ weakens modestly, consolidates after recent rout
* C$ at C$1.0434 vs US$, or 95.84 U.S. cents * Loonie gains against most currencies, rises against euro * Canadian bond prices lower across the curve By Leah Schnurr TORONTO, Nov 1 (Reuters) - The Canadian dollar weakened modestly against the greenback on Friday, consolidating after a recent rout as the currency found support in sturdier-than-expected domestic growth data. Data on Thursday showed the Canadian economy grew at a faster-than-forecast pace in August, helped by growth in the oil and gas industry. The reading suggested that economic growth for the third quarter could be better than the Bank of Canada is forecasting, said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets in Toronto. A shift in policy by the Bank of Canada last week had knocked the Canadian currency lower in recent sessions after the central bank dropped its rate-hike bias, pushing analysts' expectations for an eventual increase in interest rates further out into the future. "Canada looks like it has a little more momentum than thought and, while the Bank of Canada was more dovish, this type of data will keep them from being even more dovish," said Reitzes. A report on Friday showed the pace of growth in the Canadian manufacturing sector picked up in October to its strongest level in two and a half years. The Canadian dollar was at C$1.0434 versus the greenback, or 95.84 U.S. cents, weaker than Thursday's close of C$1.0427, or 95.90 U.S. cents. Broadly, the loonie was up against most major currencies and continued its strength against the euro for a second session as markets speculated the European Central Bank could cut interest rates as soon as next week. Euro zone flash annual HICP inflation fell to just 0.7 percent in October, data showed on Thursday. The prospect of a rate cut when the ECB meets saw investors dump the euro. Against the Canadian dollar, the euro was at C$1.4080, making for a drop of more than 2 percent in as many days. "That's getting the euro hit pretty hard," Reitzes said. A rate cut is a possibility, though the central bank may also want to wait and get another month of inflation numbers, he said. Canadian government bond prices were lower across the maturity curve. The two-year bond was down 1-1/2 Canadian cents to yield 1.110 percent, and the benchmark 10-year bond slipped 19 Canadian cents to yield 2.446 percent.
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