CANADA FX DEBT-C$ flat as U.S. budget battle takes spotlight

* C$ at C$1.0313 versus US$ or 96.96 U.S. cents
    * U.S. government faces shutdown over budget impasse
    * Bond prices lower

    By Solarina Ho
    TORONTO, Sept 26 (Reuters) - The Canadian dollar held steady
against its U.S. counterpart on Thursday with the market focused
on upcoming economic data and the budget impasse in the U.S.
Congress that threatens a government shutdown next week and a
debt default.
    "The loonie is still driven by factors outside of Canada,"
said Rahim Madhavji, president, Knightsbridge Foreign Exchange,
a commercial foreign exchange dealing firm.
    "In the short term, the secondary risk, which is starting to
creep up, and really shouldn't be a factor, is the whole debt
ceiling issue."
    The Congress, struggling to avert a government shutdown next
week, was warned by the Obama administration on Wednesday that
the Treasury was quickly running out of funds to pay government
bills and could soon face a damaging debt default.
    The Canadian dollar finished its North American
session at C$1.0313, or 96.96 U.S. cents, exactly where it stood
at Wednesday's North American close. It was outperforming most
of its main currency counterparts.
    "Most currency markets are feeling very quiet as players
reposition themselves and begin to shift into data-watching
mode," said Camilla Sutton, chief currency strategist at
Scotiabank, noting that the most important of the upcoming data
will be U.S. employment figures a week from this Friday.
    The budget impasse shifted some investor attention away from
the U.S. Federal Reserve's surprising decision last week not to
scale back its massive bond purchases just yet.
    The U.S. dollar gained broadly against a basket of
currencies on Thursday, recouping losses from the
previous session, after stronger-than-expected U.S. weekly
jobless claims data favored the view that the Fed will start
winding down is stimulus program this year. 
    "I think the loonie is at risk of having a pretty sharp
decline when the tapering timing formalizes itself," Madhavji
    Prices for Canadian government bonds were lower. The
two-year bond was off 1.7 Canadian cent to yield
1.220 percent. The benchmark 10-year bond slipped 12
Canadian cents to yield 2.590 percent.