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CANADA FX DEBT-C$ falls on U.S. dollar rally on GDP; ECB rate cut

By Solarina Ho

TORONTO, Nov 7 (Reuters) - The Canadian dollar weakened

against its U.S. counterpart on Thursday after data showed the

U.S. economy grew faster than expected in the third quarter and

jobless claims fell in the latest week.

The U.S. dollar rallied after data showed U.S. gross

domestic product expanded at a 2.8 percent annual rate, the

quickest pace since the third quarter of 2012. Economists had

expected a 2.0 percent rate.

Businesses restocked shelves, but a slowdown in consumer and

business spending pointed to underlying weakness.

"Certainly top line coming in at 2.8 looks great, but the

beneath the details there are some things that might take off

the shine off the headline figure," said Mazen Issa, macro

strategist TD Securities, noting the slower consumer spending.

"(It's) a much more positive story for the U.S. economy,

which is providing a large boost on the U.S. dollar and

consequently outperforming relative to the Canadian dollar."

Also surprising markets was the unexpected interest rate cut

by the European Central Bank, which sent the euro falling to a

seven-week low against the U.S. dollar.

The Canadian dollar hit its firmest level against the euro

in more than a month after the ECB cut its main refinancing rate

to a record low of 0.25 percent.

"The effect of it will be fairly marginal, but it's more of

symbolic move given that inflation has decelerated in Europe,"

said Issa. "Certainly CAD (the Canadian dollar) has been one of

the beneficiaries following that decision."

The Canadian dollar, which was mostly outperforming

other currency counterparts, was trading at C$1.0435 versus the

greenback, or 95.83 U.S. cents at 9:45 a.m. (1445 GMT), slightly

off Wednesday's finish at C$1.0418, or 95.99 U.S. cents.

It was trading at C$1.3949 versus the euro, or 0.7169 euro


Looking ahead, investors were also eyeing North American

jobs data, due for release on Friday. Economists are expecting

125,000 jobs added in the United States and 13,000 new jobs

created in Canada for the month of October.

Government bond prices were mostly higher across the

maturity curve, with the two-year bond rising 3.5

Canadian cents to yield 1.103 percent. The benchmark 10-year

bond was slightly higher, up 4 Canadian cents to

yield 2.533 percent.