* C$ rises to C$0.9455 vs US$, or $1.0576
* Secular US$ slide, firm fundamentals cited
* Light flows at month end accentuate move
* Canada February GDP shrinks unexpectedly
* Markets eye rising NDP in election campaign
(Updates to afternoon, adds analyst comment)
TORONTO, April 29 (Reuters) - Canada's dollar matched its
3-1/2 year high against a broadly weaker U.S. currency on
Friday, shrugging off data that showed Canada's economy shrank
unexpectedly and uncertainty over next week's federal
Canada's gross domestic product slipped 0.2 percent in
February, initially nudging the Canadian dollar lower and
reinforcing expectations that the central bank will hold
interest rates steady until the second half of this year.
"The fact that the Canadian dollar continues to rally amid
a secular decline in the U.S. dollar is of no great surprise,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
"The fact that it was able to withstand a miss on the GDP
and ahead of any kind of political uncertainties leading into
the election has been more of an indicator of the fundamental
support for the currency going forward."
At 1:47 p.m. (1747 GMT), the Canadian dollar
at C$0.9467 to the U.S. dollar, or $1.0563, up from Thursday's
North American finish at C$0.9510 to the U.S. dollar.
Earlier, it touched C$0.9455 to the U.S. dollar or $1.0576,
the 3-1/2 year high it reached April 21.
Some analysts say breaking through that resistance could
see the currency target the modern-day high of C$0.9059, or
US$1.1039, reached in November 2007.
Strong oil prices and positive U.S. equities also lent
support, as did sober second thoughts about the GDP miss.
"It doesn't take much away from what's going to be a strong
first quarter for the Canadian economy, so any weakness that we
see in the Canadian dollar as a result of this number should be
relatively short-lived," said David Tulk, chief Canada macro
strategist at TD Securities.
Contributing to the volatility was end-of-month positioning
and thin volumes due to holidays in Britain and Japan.
Looking ahead, currency traders are keeping a close eye on
the upcoming federal election. The left-leaning New Democrats
have closed in on Canada's ruling Conservatives just days
before the May 2 vote. [ID:nN29120747]
The unprecedented success of the NDP has forced apathetic
markets to sit up and take notice of their platform, fretting
about plans to raise corporate taxes, spend more and redo
energy policy. [ID:nN27126329]
"The only thing I think is going to be market moving is the
election on Monday night. I think the NDP can play a spoiler
role in the Canadian dollar rally," said Firas Askari, head of
foreign exchange trading at BMO Capital Markets.
"If they are the official opposition then I think people
will take some Canadian dollar bets off the table."
Canadian bond prices extended gains across the curve after
the GDP data, outperforming U.S. Treasuries. [US/]
The two-year bond
was up 6 Canadian cents to
yield 1.704 percent, while the 10-year bond added
20 Canadian cents to yield 3.200 percent.
(Additional reporting by Solarina Ho; editing by Jeffrey