* Canadian dollar at C$1.0984 or 91.04 U.S. cents
* Bond prices lower across the maturity curve
By Leah Schnurr
TORONTO, Sept 10 (Reuters) - The Canadian dollar weakened
against the greenback on Wednesday as it tried for a second day
in a row to sustain a move past resistance at C$1.10 as markets
were focused on just how soon the Federal Reserve might start to
lift interest rates.
The loonie saw little reaction to data that showed
industrial capacity rose in the second quarter, though the
mostly second tier domestic economic data on tap this week is
not expected to be a significant driver of the currency.
The Canadian dollar has lost about 1 percent so far this
week, hurt by broad demand for the greenback sparked by a Fed
study earlier this week that investors expect the central bank
to keep rates lower for longer than policymakers themselves
expect.
Although the fundamentals point to a weaker loonie, there
could be the potential for the U.S. dollar to see a pullback
after two months of gains, said Shaun Osborne, chief currency
strategist at TD Securities in Toronto.
"There's been an uninterrupted rally in the U.S. dollar that
is really quite unusual. It's rare that we see these moves for
more than eight weeks or so without some sort of correction
forming," Osborne said.
"I rather think that although a lot of things suggest U.S.
dollar-Canadian dollar should be higher, we may struggle to
really push on through C$1.10 here at the moment."
The Canadian dollar was at C$1.0984 to the
greenback, or 91.04 U.S. cents, weaker than Tuesday's close of
C$1.0971, or 91.15 U.S. cents.
The loonie touched a low of C$1.1014 in overnight trading
but was unable to hold the C$1.10 mark, which has acted as
technical resistance several times in August.
Analysts expect the Canadian dollar is likely to continue to
take its cues from the direction of the greenback. Monetary
policy could remain at the fore heading into next week's Fed
meeting, with investors speculating over whether the central
bank will change the language in its statement.
While Osborne still expects to see the loonie fall to C$1.12
by the end of the year, the currency could consolidate to around
C$1.08 in the next couple of weeks, he said.
Canadian government bond prices were lower across the
maturity curve, with the two-year off 1-1/2 Canadian
cents to yield 1.148 percent and the benchmark 10-year
down 18 Canadian cents to yield 2.198 percent.
(Editing by Chizu Nomiyama)