CANADA FX DEBT-C$ flat as investors watch U.S. budget battle

* C$ at C$1.0313 versus US$ or 96.96 U.S. cents
    * U.S. government faces shutdown amid budget impasse
    * Bond prices lower

    By Solarina Ho
    TORONTO, Sept 26 (Reuters) - The Canadian dollar held steady
against its U.S. counterpart on Thursday with investors focused
on upcoming economic data and the budget impasse in Congress
that threatens a U.S. government shutdown next week and a debt
    "Most currency markets are feeling very quiet as players
reposition themselves and begin to shift into data-watching
mode," said Camilla Sutton, chief currency strategist at
Scotiabank, noting that the most important upcoming data will be
 U.S. employment figures a week from this Friday.
    "Globally, politics play an important role and when we have
political gridlock in the U.S., there's a significant risk there
going forward."
    The U.S. Congress, struggling to avert a government shutdown
next week, was warned by the Obama administration on Wednesday
that the Treasury was quickly running out of funds to pay
government bills and could soon face a damaging debt default.
    The greenback struggled to make gains against a basket of
currencies on Thursday. But the market also refrained from
aggressively selling the U.S. dollar, which has rallied when
past impasses were resolved as, on balance, this one is expected
to be. 
    The Canadian dollar was trading at C$1.0313, or
96.96 U.S. cents, at 9:39 a.m. (1339 GMT), exactly where it
stood at Wednesday's North American close. 
    Sutton said she expected he Canadian dollar, whose
performance was mixed against other major currencies, to trade
between C$1.0275 and C$1.0345 on Thursday. 
    Prices for Canadian government bonds were lower. The
two-year bond was off one Canadian cent to yield
1.217 percent. The benchmark 10-year bond slipped 12
Canadian cents to yield 2.590 percent.