CANADA FX DEBT-C$ inches stronger as greenback retraces some gains

* C$ at C$1.2596 to the greenback, or 79.39 U.S. cents
    * Bond prices higher across the curve

 (Updates to close, adds comment)
    By Andrea Hopkins
    TORONTO, March 9 (Reuters) - The Canadian dollar
strengthened slightly against its U.S. counterpart on Monday as
the greenback lost a little ground after big gains at the end of
last week, but a sharp drop in Canadian housing starts kept the
loonie's advance in check.
    The seasonally adjusted house-building metric fell short of
expectations, a move that may have been aggravated by severe
winter weather. Analysts have been watching Canada's expensive
housing market for signs of a correction after years of strong
gains raised the specter of a bubble. 
    But focus on the U.S. dollar offset the housing concern. The
greenback retraced some of the gains it made last week after
U.S. employment data came in stronger than expected, and
analysts said the overall story remained one of U.S. dollar
    "It's been a little bit of a choppy day, most drivers have
been relatively flat or negative. We had negative data on the
housing side, oil prices have been pretty flat all day, so the
bigger, broader story is the U.S. dollar story," said Camilla
Sutton, chief currency strategist at Scotiabank.
    "There was significant strengthening in the U.S. dollar last
week on the back of nonfarm payrolls and we've just seen a
little retracement from the lows. But it is still an environment
of broad U.S. dollar strength ... and we're likely to see a
weakening of the Canadian dollar (in the next few sessions)."
    The Canadian dollar ended the North American
session at C$1.2596 to the greenback, or 79.39 U.S. cents,
slightly stronger than Friday's close of C$1.2610, or 79.30 U.S.
    Sutton said the next big driver for the Canadian dollar
would likely be domestic employment data for February, due out
on Friday. 
    While the jobs report is a lagging indicator of economic
strength, Sutton said it may offer the first good look at the
impact lower oil prices have had on employment, and, ultimately,
the overall economy.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 4.5 Canadian
cents to yield 0.602 percent and the benchmark 10-year
 up 34 Canadian cents to yield 1.577 percent.

 (Editing by Jeffrey Hodgson and James Dalgleish)