CANADA FX DEBT-C$ strengthens, buoyed by U.S. presidential debate

(Adds analyst quote and details on NAFTA, updates prices)
    * Canadian dollar ends at C$1.3203, or 75.74 U.S. cent
    * Bond prices higher across flatter yield curve

    By Fergal Smith
    TORONTO, Sept 27 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Tuesday, recovering
from a nearly six-month low earlier in the session as the market
digested the U.S. presidential debate.
    A view that Democratic U.S. presidential candidate Hillary
Clinton fared better than rival Donald Trump in a television
debate supported Mexico's peso and the Canadian dollar,
both of which have strong trade ties to the United States.
    "Both of them had taken a beating over the last few days in
anticipation of the presidential debate," said Greg Anderson,
global head of foreign exchange strategy at BMO Capital Markets,
who thinks some of the discount incorporated into the currencies
was pared.
    Trump has said he would renegotiate or scrap the North
American Free Trade Agreement if he is elected.
    The Canadian dollar ended at C$1.3203 to the
greenback, or 75.74 U.S. cents, stronger than Monday's close of
C$1.3237, or 75.55 U.S. cents.
    The currency's strongest level of the session was C$1.3164,
while it touched its weakest since March 28 at C$1.3281 as oil
fell and after a dovish speech by Bank of Canada Governor
Stephen Poloz on Monday.     
    Poloz recognized that the economy is not going to respond as
positively to previous falls in the Canadian dollar, said Adam
Cole, global head of FX strategy at RBC Capital Markets.
    It suggests that the loonie may need to fall further to
support the economy, Cole added.
    U.S. crude prices settled $1.26 lower at $44.67 a
barrel after Saudi Arabia and Iran dashed market hopes for an
output-limiting deal from an oil producer meeting in Algeria.
    Canadian policymakers are facing increased pressure to
support the country's lackluster economy as infrastructure
spending takes time to kick in and record high debt loads dampen
the impact of stimulus cheques. 
    The implied probability of a Bank of Canada rate cut by
mid-2017 has increased to nearly 50 percent from less than 20
percent before a weaker-than-expected inflation report on
Friday, overnight index swaps data shows. 
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year up 0.5 Canadian cent
to yield 0.497 percent and the benchmark 10-year 
rising 28 Canadian cents to yield 0.965 percent.
    Earlier in the session the 10-year yield touched its lowest
since Aug. 11 at 0.944 percent.
    Canada's gross domestic product data for July is due on

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Lisa Shumaker)