* C$ slips to low of 97.22 U.S. cents
* Canada growth below forecasts, rates likely on hold
* Bonds track U.S. Treasuries higher in safe haven bid
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By Jennifer Kwan
TORONTO, Nov 30 (Reuters) - The Canadian dollar touched a session low on Tuesday morning after domestic data showed the economy shrank in September, while the third quarter growth rate was weaker than market forecasts.
Gross domestic product growth slowed to a 1.0 percent annual rate in the July-September period because of declining exports and a housing downturn, while the economy contracted 0.1 percent month-over-month in September. [ID:nSCLUME67I]
The quarterly report was "clearly a disappointment," but the most "disappointing aspect" of the data was the outright decline in September GDP, said Doug Porter, deputy chief economist at BMO Capital Markets.
"That puts the fourth quarter on a very soft footing and suggests that growth will struggle to do much better than what we've seen in the last couple of quarters," he said.
The median forecast of analysts in a Reuters poll was for 1.4 percent annualized growth in the quarter and September GDP growth of 0.1 percent.
The data helped send the Canadian dollar CAD=D4 to a session low of C$1.0286 to the U.S. dollar, or 97.22 U.S. cents, down nearly a cent from C$1.0186 to the U.S. dollar, or 98.17 U.S. cents, at Monday's close.
At 9:07 a.m. (1407 GMT), the currency stood at C$1.0274 to the greenback, or 97.33 U.S. cents.
"The currency was on a bit of a weak footing even prior to the result because of ongoing concerns about Europe, but this has just compounded the weakness in the currency," said Porter.
The currency's usual risk barometers, as measured by the price of crude and equity market futures, were lower as uneasiness surrounding euro zone debt problems also remained. [MKTS/GLOB]
The weak GDP could prompt the Bank of Canada to keep its benchmark interest rate on hold longer than previously thought.
Market pricing already suggests that the central bank is unlikely to change interest rates next week.
According to a Reuters calculation of yields on overnight index swaps, which reflect expectations for the policy rate, there is nearly 100 percent likelihood that the bank will stand pat. BOCWATCH
Domestic government bonds, which had been higher in a flight-to-safety bid tracking U.S. Treasuries, rose further after the Canadian GDP data.
The two-year government of Canada bond CA2YT=RR was up 12 Canadian cents to yield 1.597 percent, while the 10-year bond CA10YT=RR rose 30 Canadian cents to yield 3.048 percent. (Reporting by Jennifer Kwan; Editing by W Simon )