* C$ ends at 98.44 U.S. cents, third straight day of gains
* Canada posts strong economic growth in January
* Bonds rise with U.S. Treasuries after ADP jobs report
TORONTO, March 31 (Reuters) - The Canadian dollar rose for a third straight session against the U.S. dollar on Wednesday after data showed the economy grew at a faster than expected clip in January.
Canada's gross domestic product rose by 0.6 percent in January from 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 month-on-month GDP growth of 0.5 percent. For more see [ID:nN31434455].
"The January GDP print was just another piece in the long line of solid 2010 data," said Sacha Tihanyi, currency strategist at Scotia Capital, noting that the Canadian currency's movement was choppy but in a very tight range.
He said it was likely that liquidity will probably start becoming a bit more strained ahead of the U.S. nonfarm payrolls report for March on Friday, when Canada will be closed for the Good Friday holiday.
The currency rose as high as C$1.0125 to the U.S. dollar, or 98.77 U.S. cents, then mirrored the volatility in the price of oil, an important Canadian export whose direction sometimes drives the currency.
As crude settled higher, so did the Canadian dollar. [O/R]
The Canadian dollar ended at C$1.0158 to the U.S. dollar, or 98.44 U.S. cents, up from C$1.0195 or 98.09 U.S. cents at Tuesday's close.
The GDP 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.
"What strikes me is how broad-based the recovery is, even within manufacturing. It probably means it has staying power," said Sal Guatieri, senior economist at BMO Capital Markets.
BONDS RISE ON U.S. JOBS CONCERN
Canadian bond prices looked past the strong domestic GDP figures and sided with U.S. Treasuries, whose prices rose in response to a 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 bondwas up 1 Canadian cent at C$99.56 to yield 1.734 percent, while the 10-year bond jumped 8 Canadian cents to C$101.40 to yield 3.569 percent.
Canadian bonds had a mixed performance against their U.S. counterparts. The difference between 10-year yields narrowed by 1.1 basis points to 26.6 basis points.
Overall, Canadian bonds have been under pressure as market players increasingly price in the probability that the Bank of Canada will hike interest rates in July. (Reporting by Ka Yan Ng; editing by Peter Galloway)
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