CANADA FX DEBT-C$ nudges lower ahead of central banks, jobs data

* C$ at C$0.9858 vs.US$, or $1.0144
    * U.S. manufacturing data disappoints
    * Bank of Canada, ECB action, jobs key event risks
    * Quebec election elicits little market reaction

    By Solarina Ho
    TORONTO, Sept 4(Reuters) - The Canadian dollar edged
slightly lower against its U.S. counterpart on Tuesday as U.S.
manufacturing data showed the economy of Canada's largest
trading partner continues to struggle, disappointing investors
ahead of several events later in the week that have the
potential to move the market.
    The U.S. data, which also weighed on North American stock
markets, overshadowed Tuesday's election in the province of
Quebec in which the separatist Parti Quebecois is expected to
return to power.
    The figures showed U.S. manufacturing shrank at its sharpest
clip in more than three years last month, while separate data
showed exports and hiring in the sector slumped. 
    "The data was soft. But the data pales in comparison with
the rest of the week's events in (terms of) data risk," said
Jack Spitz, managing director of foreign exchange at National
Bank Financial.
    On Wednesday, the Bank of Canada will announce its next
interest rate decision, while Canada and the United States will
release employment data for August on Friday.   
    The central bank is expected to leave interest rates
unchanged, so investors are focused on whether Governor Mark
Carney will change the bank's recent message that interest rates
need to rise. 
    "I think (Carney's) going to be cognizant of the strength in
Canadian dollar as being an economic headwind and ultimately his
guidance, while hawkish, will likely acknowledge the strength of
the Canadian dollar and that itself may mitigate some of the
gains by loonie going forward," Spitz said.
    Analysts said the impact of the Quebec election was small,
partly because Parti Quebecois is expected to form a minority
government, which would make it more difficult for it to hold a
referendum on separation from Canada.
    "Surprisingly enough, very few people are talking about that
... I thought it might have more of an impact, but it seems like
the market is very complacent about it," said David Bradley,
director of foreign exchange trading at Scotiabank.
    The Canadian dollar finished the North American session at
C$0.9858 versus the U.S. dollar, or $1.0144, marginally weaker
than Friday's close of C$0.9857, or $1.0145.
    Earlier in the day, it touched C$0.9843, or $1.0160,
matching the high of last week, which was also the strongest
level since May.
    Spitz said the move to that level saw more investors
stepping to sell the Canadian dollar, squaring short positions
against the U.S. currency.
    Canada's dollar was stronger against most other major
currencies on Tuesday and touched a three-month high against the
Australian dollar, even though the Australian currency got a
boost after the Reserve Bank of Australia gave no indication it
would cut interest rates soon. 
    Overall, trading ranges remained tight and volatility for
the currency was low. Analysts noted Canada's dollar will take
its cue from key events every day for the remainder of the week.
    The European Central Bank is expected to unveil steps on
Thursday to deal with the region's debt crisis, including a
bond-buying scheme to help lower Spanish and Italian borrowing
    "There are expectations -- big expectations -- in terms of
what (ECB President Mario) Draghi will deliver. He appears to
have telegraphed at least some of it with respect to bond
buying," Spitz said. "Anything that falls short will be traded
    Canadian government bonds were firmer across the curve, with
the two-year bond climbing 5 Canadian cents to yield
1.125 percent. The benchmark 10-year bond price rose
33 Canadian cents, to yield 1.740.