* C$ at C$1.0326 vs US$, or 96.84 U.S. cents * U.S. government shutdown enters third day * Bond prices mixed across curve By Solarina Ho TORONTO, Oct 3 (Reuters) - The Canadian dollar strengthened modestly against the greenback on Thursday, though the political stalemate in Washington kept it in its recent trading band. Lawmakers in the United States appeared no closer to resolving the budget deadlock that has resulted in a partial shutdown of the federal government, which was in its third day. Investors were concerned about what impact the impasse will have on a still-fragile economic recovery. Analysts said a shutdown that drags on longer than a few days will start to bite into economic growth in the United States, Canada's biggest trading partner. U.S. employment data, usually a key market mover, was due out on Friday, but with the shutdown in effect the figures are not expected to be released until the budget impasse is resolved. "The Canadian dollar, much like most global currencies, is playing a little bit of 'Waiting for Godot' if you will, in the sense that if Godot is the U.S. nonfarm payrolls data," said Brad Schruder, director of foreign exchange at BMO Capital Markets. Following a brief spike after the U.S. Federal Reserve's decision to stand pat on its economic stimulus program on Sept. 18, the Canadian dollar has been trading in a tight range. "We'll call it the eye of the storm," said Jack Spitz, managing director of foreign exchange at National Bank Financial in Toronto. "There's plenty of volatility around us, but it seems to be having a self-mitigating impact on dollar-Canada dollar." The Canadian dollar closed at C$1.0326, or 96.84 U.S. cents, marginally stronger than Wednesday's close of C$1.0332, or 96.79 U.S. cents. The currency is expected to trade between C$1.0320 and C$1.0350 for the balance of the week, said Schruder, adding that Ivey September manufacturing data for Canada on Friday could give the currency a modest push. In the longer term, the Canadian dollar is expected to lose ground against its U.S. counterpart in coming months, though economists forecast the currency will be more resilient than previously anticipated, a Reuters poll released on Thursday found. The median forecast of more than 50 economists and currency strategists was for the Canadian dollar to trade at C$1.030 to the U.S. dollar, or 97.09 U.S. cents, in a month's time. Those polled expected the loonie to weaken to C$1.040 in the next three months, and saw it holding at that level in six and 12 months from now. The U.S. government shutdown this week has cast uncertainty on two big points of focus for markets: the looming deadline to raise the debt ceiling and its influence on central bank policy. The next big political battle lawmakers face is raising the $16.7 trillion U.S. debt ceiling by mid-October. Failure to do so would force the United States to default on some payment obligations, and the inability of U.S. politicians to end the government shutdown has stoked concerns about their ability to come to an agreement on debt. While the political wrangling has shifted some attention away from monetary policy, analysts were trying to gauge what effect a lengthy shutdown might have on the U.S. Federal Reserve's efforts to prop up the economy. The central bank surprised markets last month by maintaining asset buying in its stimulus program at $85 billion a month. Analysts were speculating the fiscal drag on the economy spurred by the shutdown could prevent the Fed from reducing those bond purchases as soon as had been expected. Prices for Canadian government bonds were higher across the maturity curve. The two-year bond rose 1.5 Canadian cents to yield 1.180 percent, while the benchmark 10-year bond gained 6 Canadian cents to yield 2.541 percent.