CANADA FX DEBT-C$ falls on weak GDP, fading stimulus hopes

* C$ at C$1.0029 vs US$, or 99.71
    * Earlier, C$ hit 11-wk high of C$1.0003, or 99.97 U.S.
    * Economy grows at slower-than-expected pace in May
    * Bond prices climb across the curve

    By Claire Sibonney
    TORONTO, July 31 (Reuters) - Canada's dollar slipped against
its U.S. counterpart on Tuesday, retreating from an 11-week high
that was within striking distance of parity on disappointing
domestic growth data and fears central banks may not deliver
enough stimulus to ease  concerns about a global slowdown.
    Economic growth in Canada shifted into low gear in May on
unexpected weakness in the manufacturing sector, casting doubt
on the country's ability to distance itself from the
disappointing performance plaguing the United States.
    The data helped solidify many analysts' view that the Bank
of Canada will likely remain on the sidelines on raising
interest rates until at least 2013 because growth doesn't look
fast enough to cause inflationary pressures.
    A Reuters poll earlier this month showed most Canadian
primary dealers expect the central bank to hold interest rates
steady until mid-2013 or later. 
    "Remember they were already calling for a fairly mediocre
second quarter in their downgraded outlook," said Avery
Shenfeld, chief economist for CIBC World Markets.
    "If anything they may be slightly on the high side of what
looks reasonable. This won't be far off their projection. It's
simply too slow to be thinking of raising interest rates any
time soon."
    At 3:04 p.m. (1904 GMT), the Canadian dollar stood
at C$1.0029 versus the greenback, or 99.71 U.S. cents, softer
than Monday's North American session close at C$1.0018 against
the greenback, or 99.82 U.S. cents.
    Earlier on Tuesday, the Canadian currency touched C$1.0003,
or 99.97 U.S. cents, its firmest level since mid-May.
    The currency also softened as investors feared a recent
rally built on hopes of new stimulus from central banks in the
United States and Europe had been overdone.
    Riskier assets have been boosted by mounting expectation
that the European Central Bank will revive its bond buying
program to help lower the borrowing costs of debt-stricken Spain
and Italy, while the U.S. Federal Reserve has been under renewed
pressure to support flagging growth.
    Both central banks hold policy meetings this week. 
    "People are just ... waiting to see what happens tomorrow
with the Fed and Thursday with the ECB ... and that's why the
range is just as tight as it is. Pretty much every currency is
pretty tight today," said Benjamin Reitzes, senior economist and
foreign exchange strategist at BMO Capital Markets.
    Last week, ECB President Mario Draghi said the ECB was ready
to do whatever it takes to preserve the euro. 
    "I think that people are reluctant to really take on any big
positions either way because if the ECB does really act in a
bold manner, you could get a big risk-on rally, and if they
disappoint, well, look out," added Reitzes.
    Charles St-Arnaud, economist and currency strategist at
Nomura Securities in New York, said the Canadian dollar could
easily revisit parity on positive headlines from either the Fed
or the ECB.
    He noted that any negative comments could take the currency
back to C$1.0080.
    Canadian bond prices climbed across the curve, tracking U.S.
Treasuries on the way up. Canada's two-year bond 
edged up 1 Canadian cent to yield 1.085 percent, and the
benchmark 10-year bond gained 11 Canadian cents to
yield 1.689 percent.