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* C$ at $0.9949 vs US$, or $1.0051 * U.S. manufacturing data contracts unexpectedly in Nov * Canada PMI shows manufacturing slowed for 5th month * Bond prices mixed By Solarina Ho TORONTO, Dec 3 (Reuters) - The Canadian dollar softened against the U.S. currency on Monday after U.S. data showed the country's manufacturing sector shrank unexpectedly in November, though signs of economic growth in China tempered losses. The Institute for Supply Management (ISM) said its index of national factory activity in the United States fell to 49.5 in November from 51.7 the month before, its lowest level in more than three years and below expectations. "Equities turned after the ISM data came out this morning," said David Bradley, director of foreign exchange trading at Scotiabank, but added the moves were very limited. "There's just a lot of market positioning going on ahead of some of the central bank announcements later this week, some more data coming out this week." 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." The Canadian dollar finished the session at C$0.9949 versus the U.S. dollar, or $1.0051, compared with Friday's North American session close of C$0.9936, or $1.0064. "Unfortunately, I just think we're going to be in for phases of almost historically low volatility, especially now that we're into December, heading into the holiday season. I don't see anything that's going to push us out of this range," said Bradley, adding that investors may buy the Canadian dollar as it approaches C$0.9960. Canada also underperformed against most other major currencies, although it did touch a 1-1/2 week high against the Australian dollar 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. Investors will be watching the Bank of Canada's interest rate announcement on Tuesday for any shift in its long-held tightening bias. "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. The central bank is expected to hold off raising interest rates until the fourth quarter of 2013 but will continue to talk about a hike, a Reuters poll of market forecasters found. "There's a bit of uncertainty over the last couple of meetings based out of (Governor Mark) Carney being so hawkish in the beginning of the summer ... but I think this meeting's going to be a non-event, to be honest," Bradley 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 were mixed, with the two-year bond up 1 Canadian cent to yield 1.064 percent, while the benchmark 10-year bond lost 3 Canadian cents to yield 1.702 percent.