* Canadian dollar at C$1.3112, or 76.27 U.S. cents
* Bond prices mixed across the maturity curve
* 10-year yield touches a fresh historic low at 0.904 percent
By Fergal Smith
TORONTO, Sept 30 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as its economy grew more than expected in July, offsetting a reduction in risk appetite as shares of Germany's biggest bank slumped.
Canada's gross domestic product grew 0.5 percent in July, fueled by a rebound in oil and gas extraction that had been disrupted by wildfires in Alberta earlier this year, data from Statistics Canada showed. The growth in the economy topped analysts' forecasts for a gain of 0.3 percent. June's growth was unrevised at 0.6 percent. in all a solid report ... it should definitely push back against some of the recent pessimism we see in the market," said Andrew Kelvin, senior rates strategist at TD Securities.
The implied probability of an interest rate cut by mid-2017 fell to roughly 30 percent from nearly 50 percent before the report, overnight index swaps data showed. BOCWATCH
Oil firmed, helped by an agreement this week by the Organization of the Petroleum Exporting Countries to limit crude output at its policy meeting in November. U.S. crude CLc1 prices were up 0.23 percent at $47.94 a barrel. reduction in risk appetite restrained gains for Canada's commodity-linked currency as investors worried about the health of Deutsche Bank (DE:DBKGn). 9:11 a.m. EDT (1311 GMT), the Canadian dollar CAD=D4 was trading at C$1.3112 to the greenback, or 76.27 U.S. cents, stronger than Thursday's close of C$1.3149, or 76.05 U.S. cents.
The currency's strongest level of the session was C$1.3103, while its weakest was C$1.3195.
On Tuesday, the loonie hit its weakest in nearly six months at C$1.3281, pressured by recent disappointing domestic economic data and a more dovish tone from the Bank of Canada.
In other domestic data, producer prices unexpectedly fell in August as meat and dairy products saw the largest decrease in nearly nine years, while lower prices for energy and petroleum products also weighed, data from Statistics Canada showed. government bond prices were mixed across the yield curve, with the two-year CA2YT=RR down 1.5 Canadian cents to yield 0.503 percent and the benchmark 10-year CA10YT=RR rising 6 Canadian cents to yield 0.948 percent.
Earlier, the 10-year yield touched a fresh historic low at 0.904 percent.