* Canada promises tough measures to cut deficits
* C$ closes at 97.03 U.S. cents, dips after budget
* Bonds little changed, await U.S. nonfarm payrolls
* Government plans C$95 bln of gross bond issuance (Adds details)
By Ka Yan Ng
TORONTO, March 4 (Reuters) - The Canadian dollar closed higher against the U.S. dollar but off its session high on Thursday, showing little reaction to the release of the federal government's 2010-11 budget.
Closing the stimulus tap and cutting spending sharply after the economy recovers will rein in Canada's record budget deficit, the government said on Thursday. [ID:nCFB000108]
But with some of the details leaked ahead of the publication, there was a muted reaction from government bonds and the Canadian dollar.
"The market is not in the least surprised," said Eric Lascelles, chief economics and rates strategist at TD Securities.
"There's nothing really of interest to the broader market. That's not such a bad thing these days. These days you don't want to risk the ire of the financial markets, so to have a budget that elicits little reaction is probably as much as you can ask for."
The Canadian dollar closed higher for a fifth straight session at C$1.0306 to the U.S. dollar, or 97.03 U.S. cents, compared with C$1.0320 to the U.S. dollar, or 96.90 U.S. cents, at Wednesday's close.
It slipped to C$1.0315 to the U.S. dollar, or 96.95 U.S. cents, after the budget was published although Lascelles said the fall back may be attributed to caution ahead of release of U.S. nonfarm payrolls data for February on Friday. [ID:nN02150933]
Earlier, data showed Canadian building permits and purchasing data came in weaker than expected, while consumer confidence edged higher. But the Canadian dollar was able to fight through the disappointing data. [ID:nN04146256]
"It has been on balance a good day for the Canadian dollar, overcoming a weak Ivey (purchasing managers index) number, overcoming broadly-based U.S. dollar strength...and (despite) commodities that have by and large have been lower," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"With the U.S. dollar being bid across the board, the Canadian dollar's muted performance does reflect some strength when compared to other major currencies."
BONDS LITTLE CHANGED, EYE ISSUANCE
Canadian bonds were little changed across the curve with a bias lower. TD's Lascelles said the government's plan in 2010-2011 to issue about C$95 billion in domestic marketable bonds was higher than he had expected. [ID:nCFB000110]
"Conceivably there could be a slight bond bearish influence from this budget, but ultimately there is also the effect that anytime Canada makes any fiscal announcement it looks good on the international stage and it attracts investors. That story will probably temper the reaction."
The two-year Canadian government bond