CANADA FX DEBT-C$ nudges higher as firmer stocks offset GDP miss

    * Canadian dollar at C$1.2907, or 77.48 U.S. cents
    * Loonie touches its weakest sine Friday at C$1.2940
    * Canada's gross domestic product dips 0.1 percent in
    * Bond prices higher across the yield curve

    TORONTO, March 29 (Reuters) - The Canadian dollar edged
higher against its U.S. counterpart on Thursday as firmer stock
prices offset data showing the domestic economy unexpectedly
contracted at the start of the year.    
    Canada's gross domestic product dipped 0.1 percent in
January after a revised 0.2 percent gain in December. Analysts
had expected a 0.1 percent increase.             
    Chances of a Bank of Canada interest rate hike in May
slipped to 54 percent from above 60 percent before the data, the
overnight index swaps market showed.           
     Stock markets rose as investors dusted themselves down
after a woeful week for the tech sector, readying for what was
set to be the first quarterly drop in global equities in two
    Canada's commodity-linked currency tends be sensitive to
stock market performance due to the signal it sends about the
strength of the global economy.
    The price of oil, one of Canada's major exports, slipped as
supportive comments from the Organization of the Petroleum
Exporting Countries that its output curbs were likely to stay in
place for the rest of the year were offset by another rise in
U.S. inventories.             
    U.S. crude        prices were down 0.1 percent at $64.29 a
    At 9:08 a.m. ET (1308 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.2907 to the greenback, or
77.48 U.S. cents.
    The currency's strongest level of the session was C$1.2890,
while it touched its weakest since Friday at C$1.2940.
    U.S. Trade Representative Robert Lighthizer on Wednesday
expressed optimism that talks to modify the North American Free
Trade Agreement could be wrapped up quickly, but a top Canadian
official was more downbeat, saying much work remained.
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 4.5 Canadian cents to
yield 1.782 percent and the 10-year             rising 19
Canadian cents to yield 2.098 percent.
    The gap between the 2-year yield and its U.S. equivalent
widened by 2.4 basis points to a spread of -50.4 basis points.

 (Reporting by Fergal Smith; Editing by David Gregorio)