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CANADA FX DEBT-C$ weakens modestly, consolidates after recent rout

* C$ at C$1.0434 vs US$, or 95.84 U.S. cents

* Loonie gains against most currencies, rises against euro

* Canadian bond prices lower across the curve

By Leah Schnurr

TORONTO, Nov 1 (Reuters) - The Canadian dollar weakened

modestly against the greenback on Friday, consolidating after a

recent rout as the currency found support in

sturdier-than-expected domestic growth data.

Data on Thursday showed the Canadian economy grew at a

faster-than-forecast pace in August, helped by growth in the oil

and gas industry.

The reading suggested that economic growth for the third

quarter could be better than the Bank of Canada is forecasting,

said Benjamin Reitzes, senior economist and foreign exchange

strategist at BMO Capital Markets in Toronto.

A shift in policy by the Bank of Canada last week had

knocked the Canadian currency lower in recent sessions after the

central bank dropped its rate-hike bias, pushing analysts'

expectations for an eventual increase in interest rates further

out into the future.

"Canada looks like it has a little more momentum than

thought and, while the Bank of Canada was more dovish, this type

of data will keep them from being even more dovish," said


A report on Friday showed the pace of growth in the Canadian

manufacturing sector picked up in October to its strongest level

in two and a half years.

The Canadian dollar was at C$1.0434 versus the

greenback, or 95.84 U.S. cents, weaker than Thursday's close of

C$1.0427, or 95.90 U.S. cents.

Broadly, the loonie was up against most major currencies and

continued its strength against the euro for a second session as

markets speculated the European Central Bank could cut interest

rates as soon as next week.

Euro zone flash annual HICP inflation fell to just 0.7

percent in October, data showed on Thursday. The prospect of a

rate cut when the ECB meets saw investors dump the euro. Against

the Canadian dollar, the euro was at C$1.4080, making for a drop

of more than 2 percent in as many days.

"That's getting the euro hit pretty hard," Reitzes said. A

rate cut is a possibility, though the central bank may also want

to wait and get another month of inflation numbers, he said.

Canadian government bond prices were lower across the

maturity curve. The two-year bond was down 1-1/2

Canadian cents to yield 1.110 percent, and the benchmark 10-year

bond slipped 19 Canadian cents to yield 2.446