* C$ jumps to 95.53 U.S. cents, highest in almost a week
* Bonds fall sharply as rate hike expectations edge up
* Canada economy roars back to life in Q4
TORONTO, March 1 (Reuters) - Canada's currency strengthened against the U.S. dollar, while government bonds fell across the curve, after data showed Canada's quarterly economic growth beat estimates, raising the possibility that the Bank of Canada hikes rates sooner than expected.
The Canadian dollar rose to its highest in nearly a week at C$1.0468 to the U.S. dollar, or 95.53 U.S. cents, from C$1.0528 to the U.S. dollar, or 94.98 U.S. cents, just before the data was released.
It was also up from Friday's close at C$1.0525 to the U.S. dollar, or 95.01 U.S. cents.
Strong consumer spending and new housing construction boosted Canada's annualized economic growth for the fourth quarter of 2009 to 5.0 percent, Statistics Canada said, exceeding market expectations of a 4.1 percent increase. [ID:nN01244875]
The report also surpassed the Bank of Canada's projection that the economy grew 3.3 percent in the fourth quarter, which could fuel debate that the central bank could lift rates before its conditional pledge runs out.
The bank has promised to keep rates low until the end of the second quarter as long as inflation remains in check.
"At this point, I think the Bank does have scope to maintain its conditional commitment of holding the overnight rate unchanged until the end of the second quarter, although certainly the probability is rising that they may have to move in advance of that," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, edged higher after the data, showing the market saw tightening as slightly more likely.
Canadian bond yields also edged higher after the data. The two-year Canadian government bondfell 8 Canadian cents to C$100.35 to yield 1.322 percent, while the 10-year bond dropped 26 Canadian cents to C$102.54 to yield 3.427 percent. (Editing by Jeffrey Hodgson)
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