* C$1.0466 vs US dollar, or 95.55 U.S cents
* U.S. factory data stronger than expected
* European debt woes still weigh
* C$ touched 2011 low overnight
* Bond prices still higher across the curve
By Andrea Hopkins
TORONTO, Oct 3 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday after U.S. data showed factory strength may keep Canada's largest trading partner out of recession.
U.S. factory activity expanded at a faster pace than expected in September as production and hiring increased, a report by the Institute for Supply Management (ISM) showed. [ID:nN1E7920NX]
"That manufacturing ISM, being much better than expected, definitely helped the (Canadian) dollar. It had weakened throughout the morning but we've had a solid rebound on the back of that strong U.S. data," said Benjamin Reitzes, economist at BMO Capital Markets.
"It suggests that sentiment may be weaker than the actual economic data."
A separate report out on Monday showed Canadian manufacturing activity picked up pace for a third straight month in September, adding to hope the economy will avert another recession. [ID:nT5E7K902M]
At 11:38 a.m. (1538 GMT), the Canadian dollar CAD=D3 stood at C$1.0466 to the U.S. dollar, or 95.55 U.S. cents, up from Friday's close at C$1.0482 to the U.S. dollar, or 95.40 U.S. cents.
It earlier hit C$1.0524, its weakest level since September, 2010.
Adam Cole, global head of FX strategy at RBC Capital Markets in London, said the Canadian dollar should trade in a range between C$1.04-C$1.0525 "unless we see a really big sell off in equity markets."
He said traders are still closely watching Europe with no major news on the economic front in Canada due out until employment data is released on Friday. ECONCA
World stocks, oil and the euro slid on Monday after Athens admitted it will miss deficit targets. [MKTS/GLOB]
Draft budget figures showed Greece would miss its deficit targets for both this year and next, which could force the country to seek more bailout funds. If it fails to get the financing, the government may be forced to default, an outcome that could accelerate a slide back into global recession. For details, see [ID:nL5E7L20IT]
Concerns about the European banking sector also sent the euro to an 8-1/2 month low against the dollar, although it recovered ground later after the U.S. data release.
Canadian banks have said they have little to no exposure to Greek debt.
Bond prices were higher across the curve. The two-year Canadian government bond CA2YT=RR was up 2 Canadian cents to yield 0.874 percent, while the 10-year bond CA10YT=RR gained 35 Canadian cents to yield 2.116 percent. (Editing by Jeffrey Hodgson)