CANADA FX DEBT-C$ ends higher, bonds tumble; eyes on Oct GDP

* C$ ends higher at 94.53 U.S. cents

* Bonds track U.S. market lower

* Canada GDP for October due Wednesday morning

TORONTO, Dec 22 (Reuters) - The Canadian dollar firmed
against the U.S. currency on Tuesday, boosted by higher oil
prices, and as investors were reassured by the prime minister's
comments about Ottawa's fiscal restraint.

Ongoing optimism about the economic recovery in Canada and
the United States added to positive momentum for the currency,
although market watchers cautioned that price moves across most
markets remained exaggerated by light pre-Christmas trade.

Strong U.S. housing data buoyed optimism, but the
enthusiasm was tempered by slower pace of third-quarter growth
in the United States than expected. [ID:nN22392364]

Still, riskier asset classes such as stocks pushed higher
on the rosier view, supporting the Canadian dollar, and took
attention away from the relative safety of government debt.

The Canadian dollar finished at C$1.0579 to the U.S.
dollar, or 94.53 U.S. cents, up from C$1.0614 to the U.S.
dollar, or 94.22 U.S. cents, at Monday's close.

Real gross domestic product data for October, due
Wednesday, is expected to build on strength from September and
contribute to a healthier fourth-quarter reading of growth
after Canada barely exited recession in the last quarter.

Analysts forecast a reading of 0.3 percent growth. This
week's retail sales data for October was better than expected
and augured well for an economic recovery.

"It will be fairly significant, the October GDP, because it
will go a long way to firming up expectations for
fourth-quarter growth. Right now, markets are fairly optimistic
that it will flag a fairly marked improvement in growth," said
Paul Ferley, assistant chief economist at Royal Bank of
Canada.

The Canadian dollar's move higher is in keeping with a
broader strengthening trend, and published comments by Prime
Minister Stephen Harper also helped to boost the currency, said
Camilla Sutton, currency strategist at Scotia Capital.

"On a relative basis, not only is Canada better positioned
in terms of our fiscal deficit, but I think we have a more
credible plan in place as to how we will decrease the deficit
we have. I think Harper's comments just highlight that."

The prime minister said Ottawa would continue recovery
spending until 2011, but Canadians should expect five years of
belt-tightening. [ID:nN2250738]

BONDS FOLLOW U.S. TREASURIES

With no major domestic data on tap, Canadian bond prices
followed the big U.S. Treasury market lower, which was knocked
down by growing optimism that the U.S. economy is pulling out
of recession.

The two-year government bond CA2YT=RR fell 7 Canadian
cents to C$99.73 to yield 1.394 percent, while the 30-year bond
CA30YT=RR dropped 75 Canadian cents to C$114.30 to yield
4.124 percent.

Canadian notes put in a mixed performance against U.S.
bonds, with the belly of the curve outperforming. But the
10-year yield spread widened to 15.6 basis points below its
U.S. counterpart from 16.7 basis points the previous session.
(Reporting by Ka Yan Ng; editing by Rob Wilson)