CANADA FX DEBT-C$ falls from near-parity to US$ after GDP

* Economy grows at slower-than-expected pace in May
    * C$ hits low of C$1.0044 vs US$, or 99.56 U.S. cents
    * Earlier, C$ hit 11-wk high of C$1.0003, or 99.97 U.S.
    * Bond prices climb across the curve

    By Jennifer Kwan
    TORONTO, July 31 (Reuters) - Canada's dollar touched a
session low against its U.S. counterpart on Tuesday, retreating
from an 11-week high in striking distance of parity after
domestic growth data showed the economy grew by less than
    Canada's economy grew by 0.1 percent in May from April as
weak manufacturing and construction activity partially offset
strength in natural resources and some services industries.
    The Canadian currency fell as low as C$1.0044
versus the greenback, or 99.56 U.S. cents, from about C$1.0029
just before the data's release.
    Analysts in a Reuters poll had forecast, on average, 0.2
percent growth in gross domestic product in May, following an
expansion of 0.3 percent in April.
    Still, the data was not seen having a big impact on the Bank
of Canada, which is expected to keep interest rates on hold
until the third quarter of next year. 
    "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 9:30 a.m. (1330 GMT), the Canadian dollar stood
at C$1.0035 versus the greenback, or 99.65 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. 
    Last week, ECB President Mario Draghi said the ECB was ready
to do whatever it takes to preserve the euro. 
    "Draghi especially ... has put his personal credibility on
the line which is something that's extraordinarily rare in
central banking," said Adam Button, currency analyst at
ForexLive in Montreal.
    "The market is now alight with speculation about some of the
fantastic things they might do and that goes for the Fed as
well, to some lesser extent, so right now we're going to witness
the full power of central banking."
    Canadian bond prices climbed across the curve, tracking U.S.
Treasuries on the way up. Canada's two-year bond rose
3 Canadian cents to yield 1.078 percent, and the benchmark
10-year bond gained 19 Canadian cents to yield 1.680