CANADA FX DEBT-C$ ends stronger following U.S. fiscal talks

* C$ closes at C$1.0010 vs US$, or 99.90 U.S. cents

* Touched 3-1/2 low of C$1.0048, or 99.52 U.S. cents

* Many see White House fiscal cliff meeting as “constructive”

* Bond prices rise along the curve

By Solarina Ho

TORONTO, Nov 16 (Reuters) - The Canadian dollar notched a modest gain against the U.S. currency on Friday after touching a 3-1/2-month low earlier in the session, bolstered by a White House meeting on the “fiscal cliff” that congressional leaders said was constructive.

Democrats and Republicans emerged from a meeting with President Barack Obama on Friday vowing to find common ground on taxes and spending that would allow them to head off a looming “fiscal cliff” that could push the economy back into recession.

Equity markets rallied on the news after being mired in negative territory for much of the past two weeks.

“We’re taking our taking cues from equities more so than anything else at this point in time, because that’s the one that’s going to show the most reaction to issues arising out of not getting support for moves in the fiscal cliff talks,” said John Curran, senior vice president at CanadianForex.

The Canadian currency finished at C$1.0010 to the U.S. dollar, or 99.90 U.S. cents, slightly firmer than its North American close on Thursday of C$1.0013, or 99.87 U.S. cents.

There was “a fair bit of volatility today,” said Jack Spitz, managing director of foreign exchange at National Bank Financial. “The uncertainties prevail. And they will weigh on a currency that’s high beta, like Canada.”

The currency touched a 3-1/2-month low of C$1.0048, or 99.52 U.S. cents earlier after breaking a significant technical resistance level for the USD/CAD.

“Going into the middle of the day, the London close, (it) appeared as though people were obviously shedding some risk,” said Curran, who added that there was still corporate demand to buy Canadian dollars.

“We have had an outside day - higher high, lower low - which usually indicates the end of a trend, but this trend has been sideways, so that’s not really going to be highly indicative.”

Investors have also been focused on the slowing global economy, Europe’s debt crisis and escalating violence in the Middle East.

Canada’s performance was mixed against a basket of major currencies. It rose against the euro but reversed gains against the Australian dollar after touching a near two-week high and fell against the New Zealand dollar after hitting a 3-1/2 week high.

Next week, Canadian inflation will be the most meaningful domestic economic data released. Spitz said the report is unlikely to be influential on the Bank of Canada, since early guidance showed little to no upward price pressures.

South of the border, Wall Street will have a shortened week, due to the U.S. Thanksgiving holiday.

“Unless there are significant developments that are happening in these political hot button places like the Middle East, Europe, or Japan for that matter, then I think the market will likely use the opportunity to take a bit of a breather,” said Spitz, adding that the drop in liquidity over the holiday will also be a factor.

Prices for Canadian government debt were higher across the curve, with the two-year bond adding 1 Canadian cent to yield 1.070 percent and the benchmark 10-year bond rising 22 Canadian cents to yield 1.697 percent.