CANADA FX DEBT-C$ weaker after Fed minutes, budget fight shift

* C$ at C$0.9880 versus US$, or $1.0121
    * U.S. fiscal deal boost gives way to debt ceiling worry
    * Fed minutes show growing concern about stimulus program
    * North American employment data due on Friday

    By Alastair Sharp
    TORONTO, Jan 3 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Thursday as optimism
over a deal to avert fiscal calamity in the United States gave
way to concerns over issues Washington has yet to resolve.
    The Canadian currency was also hurt by signs that
ultra-loose monetary policy in its southern neighbor and main
trading partner could be cut short, with the minutes from last
month's U.S. Federal Reserve meeting showing growing reticence
about the policy of buying bonds to stimulate growth.
    "The latest Fed minutes added more fuel to the (U.S.)
dollar's rally as they showed a growing camp of policymakers in
favor of reducing the bank's pro-growth bond purchases," Joe
Manimbo, a senior market analyst for Western Union Business
Solutions, wrote in a note. 
    The Canadian dollar ended the day at C$0.9880 to
the greenback, or $1.0121, compared with C$0.9852, or $1.0150,
at Wednesday's North American close.
    After the partial resolution of a rancorous fiscal debate in
Washington that transfixed global markets, investors have a few
short weeks in which to focus on more material indicators of
economic growth.
    "We have a window where we are going to shift our attention
back to fundamentals over the next couple of weeks, so we'll be
looking at labor data, but as well next week we have European
Central Bank meetings," said Camilla Sutton, chief currency
strategist at Scotiabank.
    Both Canada and the United States release jobs numbers on
Friday, with Canada expected to have added a much lower number
of new positions in December than in two of the previous three
    The Canadian currency had strengthened sharply on Wednesday
after the U.S. fiscal deal was reached, but looming battles over
spending cuts and debt limits curtailed the celebration. 
    "With the lack of bipartisan support as far as politics
generally on Capitol Hill, we know we're going to have another
relatively fraught period with the debt ceiling and spending
scenarios coming around quickly," said Jeremy Stretch, head of
foreign exchange strategy at CIBC World Markets in London.
    "That's going to be one factor that will mitigate a strong
risk-on move being perpetuated." 
    Stretch said it would be difficult for the Canadian dollar
to break past C$0.9840 in the short term.
    Prices for Canadian government debt were lower across the
curve, with the two-year bond off 4 Canadian cents to
yield 1.187 percent, while the benchmark 10-year bond
 fell 47 Canadian cents to yield 1.923 percent.