CANADA FX DEBT-C$ weakens in broad US$ rally as factory sales slip

* C$ at C$1.0195 vs US$, or 98.09 U.S. cents
    * Domestic factory prices slip on lower prices for energy
    * Euro zone economy contracts; U.S. economic recovery on

    By Alastair Sharp
    TORONTO, May 15 (Reuters) - The Canadian dollar weakened
against a surging U.S. dollar in Wednesday morning trade, hurt
by slower domestic factory activity and data showing the euro
zone economy contracted more than expected in the first quarter.
    Investors took a more cautious look at the global economy
after the European data, which saw France slide back into
recession, while a decent showing from the U.S. economy has
helped its currency make solid gains against a range of rivals.
    Canadian manufacturing sales sagged in March following an
unexpected surge in February, reverting to a trend of lackluster
performance more in line with modest economic growth, according
to Statistics Canada data. 
    The contraction was driven by lower prices for energy
products and a slump in fertilizer sales, and bucked
expectations for a modest expansion.
    The loonie, as Canada's currency is colloquially known, was
trading at C$1.0195 to the greenback, or 98.09 U.S. cents, at
9:11 a.m. (1311 GMT), compared with C$1.0170, or 98.33 U.S.
cents, at Tuesday's North American close.
    "To be honest, I'd characterize the move today more as
dollar strength than CAD weakness," said Adam Cole, the global
head of currency strategy at Royal Bank of Canada. "It's a
parallel move against most of the majors, rather than being
anything specific to CAD."
    "There isn't really much of an independent Canadian story
... it's just caught in the wash of what the bigger dollar is
    A run of solid U.S. economic data has raised expectations
the Federal Reserve may wind down its asset-buying effort by the
end of the year, boosting the greenback.
    Against a basket of major currencies, the dollar has
jumped more than 2 percent in the last week, to a peak not seen
since before European Central Bank President Mario Draghi
pledged to do "whatever it takes" to save the euro.
    Prices for Canadian government bonds rose across the curve,
with the two-year bond up 1 Canadian cent to yield
1.032 percent and the benchmark 10-year bond rising
29 Canadian cents to yield 1.925 percent.