* C$ at 96.99 U.S. cents
* Bond prices firm across curve
* U.S., Canada GDP disappoint (Updates to late morning)
By Claire Sibonney
TORONTO, July 30 (Reuters) - The Canadian dollar held higher against its U.S. counterpart on Friday as recovering equity markets helped fuel demand for riskier currencies following initial disappointment over soft North American economic growth figures.
U.S. stock indexes cut losses in wobbly trading after a barometer of U.S. Midwest business activity in July jumped, while consumer sentiment data for the month came in better than expected. [.N]
"Basically market confidence is still quite high around the equities and that's flowed through to the commodity currencies," said Darren Richardson, senior corporate dealer at CanadianForex, a commercial foreign exchange firm.
He noted, however, that weaker oil prices could weigh on the Canadian dollar rally. [O/R]
The currency hit a session low following U.S. and Canadian GDP data earlier in the day before grinding higher again.
U.S. gross domestic product slowed more than expected in the second quarter, which drove investors to perceived safety of the greenback in reaction. [ID:nN29111411]
In Canada, growth in the economy edged up in May after unexpectedly stalling in April, helped by strength in the goods-producing sectors led by oil and gas extraction, while services faltered for a second straight month. [ID:nN30434455]
The Canadian data was not strong enough to boost the currency, said Eric Lascelles, chief Canada macro strategist at TD Securities.
"The Canadian figure was a little soft, GDP wasn't quite what the market had imagined but it was what we expected," he said.
"I think the market is a little disappointed. Coming on the heels of a flat figure from April, it's hard to get too excited about the recent trend in Canada."
At 11:16 a.m. (1516 GMT), the Canadian currency CAD=D4 was at C$1.0310 to the U.S. dollar or 96.99 U.S. cents, up from Thursday's finish at C$1.0362 to the U.S. dollar, or 96.51 U.S. cents. Earlier, it touched a session high of C$1.0293 to the U.S. dollar, or 97.15 U.S. cents.
The Canadian currency has struggled recently to close stronger than its 100-day moving average around C$1.03, said Steve Butler, director of foreign exchange trading at Scotia Capital.
"The market will be happy to buy dollars at the $1.0280 area, C$1.03, somewhere in there, but if we get a close below that level I think it's going to be quite positive for Canada," Butler said.
Month-end foreign exchange flows also helped support the Canadian dollar.
"Hedge funds that have made a profit in U.S. equities have to balance their books so they'll be selling their equities and selling U.S. dollars to convert them back into Canadian," said Richardson, noting that forecasts for continued higher interest rates are also benefiting the currency.
After the tame GDP data, Canadian bond prices remained higher across the curve.
The Canadian two-year bond CA2YT=RR was up 9 Canadian cent to yield 1.486 percent, while the 10-year bond CA10YT=RR added 15 Canadian cents to yield 3.142 percent.
"You'd already seen a pretty sizable rally, people are still keying off of the Fed President Bullard's quantitative easing comments yesterday but it seems to me that you've got a bit of an extra kick from the numbers this morning," Lascelles said.
On Thursday St. Louis Federal Reserve Bank President James Bullard added to fears about the economy by saying he was worried about the risks the United States might fall into a Japan-style quagmire of falling prices and investment, driving stocks and other riskier assets to retreat. [ID:nN29267085] (Reporting by Claire Sibonney; editing by Peter Galloway)