CANADA FX DEBT-C$ retreats on September GDP contraction

* Canadian dollar at C$1.3360 or 74.85 U.S. cents
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, Dec 1 (Reuters) -    The Canadian dollar retreated
against the U.S. dollar on Tuesday, reversing earlier gains,
after a deep contraction in September gross domestic product
provided a weak hand off to the fourth quarter, although
impacted by a large one-time factor.
    Gross domestic product increased at an annualized 2.3
percent rate in the third quarter, slightly below expectations
for a 2.4 percent pace, but economic activity in September
declined by a worse-than-expected 0.5 percent. 
    "The big disappointment was the September figures," said
Nick Exarhos, economist at CIBC Capital Markets.
    He added that it was mostly due to "a drop in mining, oil
and gas which was driven by disruption at a major oil sands
facility out west and most of that production came back online
in October."
    The data is not expected to impact the Bank of Canada rate
decision on Wednesday.
    At 9:21 a.m. EST (1421 GMT), the Canadian dollar 
was trading at C$1.3360 to the greenback, or 74.85 U.S. cents,
slightly weaker than the Bank of Canada's official close of
C$1.3353, or 74.89 U.S. cents.
    The currency's strongest level of the session was C$1.3310,
while its weakest level was C$1.3398. 
    The Canadian dollar firmed ahead of the data after a private
survey revealed improvement that China's factory activity
contracted at a slower pace in October, supporting sentiment for
commodity currencies. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 2.5
Canadian cents to yield 0.619 percent and the benchmark 10-year
 rising 13 Canadian cents to yield 1.555 percent.
    The Canada-U.S. two-year bond spread was 2 basis points
wider at -32.3 basis points, while the 10-year spread was 1
basis point wider at -65.8 basis points, as Canadian government
bonds outperformed on the GDP data.
    U.S. crude prices were down 0.14 percent to $41.59 a
barrel, while Brent crude lost 0.54 percent to

 (Reporting by Fergal Smith; Editing by Nick Zieminski)