CANADA FX DEBT-C$ retreats on weak North American factory data
* C$ at $0.9940 vs US$, or $1.0060 * U.S. manufacturing data contracts unexpectedly in Nov * Canada PMI shows manufacturing slowed for 5th month * Bond prices ease By Solarina Ho TORONTO, Dec 3 (Reuters) - The Canadian dollar weakened moderately against the U.S. currency on Monday after U.S. data showed the country's manufacturing sector shrank unexpectedly in November, but signs of economic growth in China tempered losses. The Institute for Supply Management (ISM) said its index of national factory activity fell to 49.5 in November from 51.7 the month before, its lowest level in more than three years and below expectations. Meanwhile, Canadian manufacturing growth slowed for a fifth straight month in November and hit a more than two-year low, according to the RBC Canadian Manufacturing Purchasing Managers Index. This signaled the third-quarter's disappointing economic performance may persist for the rest of the year. "The data's been softer for Canada and softer for the U.S. as well. The general risk-on tone that we started the day with has been eaten away at a little," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada. "Most of the indicators that we've seen coming out for Canada have been soft, and I think that's putting the Canadian dollar a little bit on a back foot - meaning there's a chance of it getting weaker." At 11:14 a.m. (1614 GMT), the Canadian currency stood at C$0.9940 versus the U.S. dollar, or $1.0060, compared with Friday's North American session close of C$0.9936, or $1.0064. It touched a low of C$0.9946, or $1.0054, after the U.S. data. Adam Cole, global head of FX strategy at RBC Capital Markets in London, said he expected the currency to trade between C$0.9900 and C$0.9960 during the session. The Canadian dollar began paring overnight gains even before the U.S. data was released, but it got a brief boost from Chinese manufacturing figures early in the day. Official and private sector surveys showed activity picked up in the country's vast manufacturing sector in November, adding to evidence that China's economy is reviving after seven quarters of slowing growth. Meanwhile, final readings of the euro zone's Manufacturing Purchasing Managers Index for November showed factory activity declining at a slower rate than it has recently, though it still left the region on course for its worst quarter since early 2009. Investors will be watching the Bank of Canada's interest rate announcement on Tuesday for any shift in its long-held tightening bias. The central bank is expected to hold off raising interest rates until the fourth quarter of 2013 but will continue to talk about a future hike when it sets policy, a Reuters poll of market forecasters found. "We still think the tightening bias will be left in place tomorrow, but we also expect a slightly more dovish language, including an admission maybe that growth is modestly weaker than what the bank was looking for," Chandler said. Markets were still cautious about the budget impasse in Washington. U.S. Treasury Secretary Timothy Geithner pushed Republicans on Sunday to offer specific ideas to cut the deficit, and predicted that they would agree to raise tax rates on the rich to obtain a year-end budget deal to try to avoid the possibility of a recession. Canadian bond prices eased across the curve. The two-year bond was off 2 Canadian cents to yield 1.080 percent, while the benchmark 10-year bond lost 17 Canadian cents to yield 1.718 percent.