CANADA FX DEBT-C$ slightly weaker after factory data dip

* C$ at C$1.0244 versus US$, or 97.62 U.S. cents
    * Weak manufacturing data hurts currency; Cyprus lurks

    By Alastair Sharp
    TORONTO, March 19 (Reuters) - The Canadian dollar weakened
on Tuesday, under pressure from weak domestic factory data and
worries about fresh European debt and banking system problems as
Cyprus heads toward a likely veto of its bailout plan.
    Canadian manufacturing sales unexpectedly fell in January
due to weak production in the aerospace, auto and energy
industries, Statistics Canada said on Tuesday, although the
number of new and unfilled orders rose sharply. 
    "We're a little softer on the back of the data that just
came out, brushing up against resistance for the U.S. dollar
here at C$1.0255/60," said Matt Perrier, managing director of
foreign exchange sales at BMO Capital Markets.
    He said that a break through that level could lead to
further Canadian dollar selling, although a half hour after the
data release the risk appeared to have abated.
    At 9:02 a.m. (1302 GMT) the Canadian dollar was
trading at C$1.0244 to the greenback, or 97.62 U.S. cents,
compared with C$1.0223, or 97.82 U.S. cents, at Monday's North
American close.
    In the background, traders were carefully monitoring
developments in Cyprus, after the small euro zone country's plan
to tax bank deposits wrecked havoc on equities, currencies and
other assets on Monday.
    "The initial reaction seems to have played through the
market and now we're waiting for additional, quantifiable news,"
Perrier said.
    A parliamentary vote on the measure looks set to fail,
putting the country's 10 billion euro bailout in jeopardy and
raising the risk of its banks defaulting. 
    The U.S. Federal Reserve's main policy-setting committee
begins a two-day meeting on Tuesday and is expected to release a
statement and forecasts on Wednesday.
    "You've got the Fed tomorrow, that should give direction to
the (U.S.) dollar side of the equation," said Royal Bank of
Canada currency strategist Elsa Lignos.
    Prices for Canadian government debt rose across the curve,
with the two-year bond up 1 Canadian cent to yield
0.982 percent, while the benchmark 10-year bond rose
14 Canadian cents to yield 1.849 percent.