* C$ ends at 96.71 U.S. cents
* Thursday's GDP data seen turning negative (Updates to close, adds quotes)
By Jennifer Kwan
TORONTO, Sept 29 (Reuters) - Canada's dollar weakened against its U.S. counterpart on Wednesday, with investors cautious ahead of domestic growth data and comments from the Bank of Canada governor due on Thursday.
The currency slipped lower even though the U.S. dollar fell for a fourth straight session, as growing prospects for further U.S. monetary easing hurt the greenback. [FRX/]
Typically, a weak greenback will help lift the Canadian currency. But market watchers said the loonie has been kept under pressure by worries about the pace of the recovery in the United States, Canada's largest trading partner by far.
The Canadian dollar CAD=D3 ended at C$1.0340 to the U.S. dollar, or 96.71 U.S. cents, down from Tuesday's finish at C$1.0302 to the U.S. dollar, or 97.07 U.S. cents.
Investors are likely selling Canadian dollars to lock in profits ahead of the key economic events on Thursday, said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
"Tomorrow you have some pretty significant hurdles for Canada in the form of GDP data and as well comments by (Bank of Canada Mark) Carney on the job outlook," said Chandler.
"After the moves we've seen where Canada has strengthened quite a bit against the U.S. dollar, people are a little bit worried there may be some cautious comments coming out of Carney tomorrow."
The central bank governor will give a speech entitled "Employment in a Modest Recovery."
A report out earlier on Thursday is expected to show Canada's gross domestic product weakened 0.1 percent in July from June. ECONCA
Finance Minister Jim Flaherty said on Wednesday the GDP report may be "a bit negative" but blamed tax changes for what he said would be a temporary blip. He also said last year's deficit may be higher than forecast. [ID:nN2996628]
BONDS PRICES FIRMER
Government bond prices were mostly firmer, with the prospect of weak domestic growth data providing some support.
More broadly, the trend has been for prices to climb on expectations the Federal Reserve will opt to increase its asset purchases to boost a sputtering U.S. economy, and after relatively well-received U.S. auctions, said RBC's Chandler.
The two-year bond CA2YT=RR rose 1.5 Canadian cents to yield 1.386 percent, while the 10-year bond CA10YT=RR rose 6 Canadian cents to yield 2.734 percent.
Canadian bonds outperformed their U.S. counterparts, with the 10-year yield narrowing to 23.8 basis points above the U.S. curve from 27.2 basis points on on Tuesday. (With additional reporting by Jeffrey Hodgson; editing by Rob Wilson)