* C$ at 98.27 U.S. cents
* Currency spikes higher after stronger-than-expected GDP
* Bonds rise with U.S. Treasuries after ADP jobs report
TORONTO, March 31 (Reuters) - The Canadian dollar added to gains against the U.S. dollar on Wednesday after data showed the economy grew at a faster-than-expected clip in January.
Canada's economy grew 0.6 percent in January compared with December, led by widespread gains in manufacturing, as well as strong wholesale trade, construction, retail sales and finance, Statistics Canada said. Analysts polled by Reuters had expected monthly GDP growth of 0.5 percent in January. For more see [ID:nN31434455].
The data confirms economists' view that the economic rebound is more robust than expected. After a stunning 5 percent annualized growth in the fourth quarter, most economic data has been surprisingly strong.
The Canadian dollar rose as high as C$1.0125 to the U.S. dollar, or 98.77 U.S. cents, then handed back some of its gains quickly.
Overall, however, the Canadian dollar was up on the day. At 8:52 a.m. (1252 GMT) it was at C$1.0176 or 98.27 U.S. cents, up from C$1.0195 or 98.09 U.S. cents at Tuesday's close.
"It's a stronger-than-expected report and it suggests the economy is gaining steam in the new year. What strikes me is how broad-based the recovery is, even within manufacturing. It probably means it has staying power. It's odd that the Canadian dollar has backed off following the report," said Sal Guatieri, senior economist at BMO Capital Markets.
He said the currency could be under pressure from a weak private sector employment report, which spurred strong buying of U.S. Treasuries.
"Any concerns about weakness in the U.S. economy tends to weigh on commodity prices and therefore the Canadian dollar," Guatieri added.
Canadian bond prices were higher on Wednesday, following U.S. Treasuries, which had turned higher in response to the private sector employment report. [US/]
The ADP National Employment Report showed a 23,000 drop in private sector hirings in March. Analysts had predicted a 40,000 increase. For more see [ID:nWEN2273].
This unexpected decline in private payrolls in March raised concerns that the U.S. government's employment report this Friday may be weaker than expected.
The two-year government bondrose 5 Canadian cents to C$99.60 to yield 1.713 percent, while the 10-year bond jumped 13 Canadian cents to C$101.45 to yield 3.563 percent. (Editing by James Dalgleish)
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