* C$ at C$1.0313 versus US$ or 96.96 U.S. cents * U.S. government faces shutdown over budget impasse * Bond prices lower By Solarina Ho TORONTO, Sept 26 (Reuters) - The Canadian dollar held steady against its U.S. counterpart on Thursday with the market focused on upcoming economic data and the budget impasse in the U.S. Congress that threatens a government shutdown next week and a debt default. "The loonie is still driven by factors outside of Canada," said Rahim Madhavji, president, Knightsbridge Foreign Exchange, a commercial foreign exchange dealing firm. "In the short term, the secondary risk, which is starting to creep up, and really shouldn't be a factor, is the whole debt ceiling issue." The Congress, struggling to avert a government shutdown next week, was warned by the Obama administration on Wednesday that the Treasury was quickly running out of funds to pay government bills and could soon face a damaging debt default. The Canadian dollar finished its North American session at C$1.0313, or 96.96 U.S. cents, exactly where it stood at Wednesday's North American close. It was outperforming most of its main currency counterparts. "Most currency markets are feeling very quiet as players reposition themselves and begin to shift into data-watching mode," said Camilla Sutton, chief currency strategist at Scotiabank, noting that the most important of the upcoming data will be U.S. employment figures a week from this Friday. The budget impasse shifted some investor attention away from the U.S. Federal Reserve's surprising decision last week not to scale back its massive bond purchases just yet. The U.S. dollar gained broadly against a basket of currencies on Thursday, recouping losses from the previous session, after stronger-than-expected U.S. weekly jobless claims data favored the view that the Fed will start winding down is stimulus program this year. "I think the loonie is at risk of having a pretty sharp decline when the tapering timing formalizes itself," Madhavji said. Prices for Canadian government bonds were lower. The two-year bond was off 1.7 Canadian cent to yield 1.220 percent. The benchmark 10-year bond slipped 12 Canadian cents to yield 2.590 percent.