* Canadian dollar at C$1.2907, or 77.48 U.S. cents
* Loonie touches its weakest sine Friday at C$1.2940
* Canada's gross domestic product dips 0.1 percent in January
* Bond prices higher across the yield curve
TORONTO, March 29 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday as firmer stock prices offset data showing the domestic economy unexpectedly contracted at the start of the year. Canada's gross domestic product dipped 0.1 percent in January after a revised 0.2 percent gain in December. Analysts had expected a 0.1 percent increase. Chances of a Bank of Canada interest rate hike in May slipped to 54 percent from above 60 percent before the data, the overnight index swaps market showed. Stock markets rose as investors dusted themselves down after a woeful week for the tech sector, readying for what was set to be the first quarterly drop in global equities in two years. Canada's commodity-linked currency tends be sensitive to stock market performance due to the signal it sends about the strength of the global economy. The price of oil, one of Canada's major exports, slipped as supportive comments from the Organization of the Petroleum Exporting Countries that its output curbs were likely to stay in place for the rest of the year were offset by another rise in U.S. inventories.
U.S. crude prices were down 0.1 percent at $64.29 a
At 9:08 a.m. ET (1308 GMT), the Canadian dollar was
trading 0.1 percent higher at C$1.2907 to the greenback, or 77.48 U.S. cents. The currency's strongest level of the session was C$1.2890, while it touched its weakest since Friday at C$1.2940. U.S. Trade Representative Robert Lighthizer on Wednesday expressed optimism that talks to modify the North American Free Trade Agreement could be wrapped up quickly, but a top Canadian official was more downbeat, saying much work remained.
Canadian government bond prices were higher across the yield
curve, with the two-year up 4.5 Canadian cents to yield 1.782 percent and the 10-year rising 19
Canadian cents to yield 2.098 percent. The gap between the 2-year yield and its U.S. equivalent widened by 2.4 basis points to a spread of -50.4 basis points.
(Reporting by Fergal Smith; Editing by David Gregorio)