CANADA FX DEBT-C$ falls to 4-1/2 yr low as GDP growth fails to support

* Canadian dollar at C$1.1209 or 89.21 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 31 (Reuters) - The Canadian dollar broke
through the C$1.12 level and fell to a 4-1/2 year low against
the greenback on Friday as data that showed the domestic economy
grew in line with expectations in November failed to dissuade
investors from selling the loonie.
    At the same time, risk aversion around the world was
heightened after data showed an unexpected drop in euro zone
inflation and as emerging markets were hit by fresh turbulence.
    The Canadian economy grew by 0.2 percent in November,
slightly softer than the month before as a recovery in the oil
industry overcame a decline in manufacturing. The figure matched
economists' expectations. 
    The loonie initially held steady after the data was released
but then fell. It has hit new 4-1/2-year lows for four sessions
in a row.
    A shift by the Bank of Canada to a more dovish policy stance
has weighed on the Canadian dollar in recent months and the
pressure has intensified since the start of the year as
investors have turned increasingly short against the currency.
The U.S. dollar has appreciated more than 5 percent against the
loonie in January.
    "I think the market just has this bias towards weakness,"
said Mazen Issa, macro strategist at TD Securities in Toronto.  
  "A lot of that has been engrained from the dovish rhetoric
that we've received from the bank."
    "So if anything, I would characterize reaction as
asymmetric. Anything that comes in as expected or slightly
weaker is likely to garner a little bit more downside reaction
compared to something that is a positive surprise," Issa said. 
    The Canadian dollar was at C$1.1209 to the
greenback, or 89.21 U.S. cents, weaker than Thursday's close of
C$1.1166, or 89.56 U.S. cents. It fell as low as C$1.1225, its
lowest level since July 2009.
    "The downward trend in the Canadian dollar is too strong to
fight or attempt to pick a bottom," Camilla Sutton, chief
currency strategist at Scotiabank, wrote in a note.  
    "We expect ongoing Canadian dollar weakness before it
stabilizes in the second half of the year."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2 Canadian cents
to yield 0.960 percent and the benchmark 10-year up
19 Canadian cents to yield 2.350 percent.