CANADA FX DEBT-C$ weakens with oil prices, flirts again with C$1.10 level

* Canadian dollar at C$1.1003 or 90.88 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 11 (Reuters) - The Canadian dollar weakened
against the greenback on Thursday as oil prices sold off and the
currency tested a break through strong technical resistance at
C$1.10 for a third day in a row.
    Data that showed new home prices in Canada were unchanged in
July elicited little reaction from the loonie, though the mostly
second tier domestic data on offer this week had not been
expected to drive the currency significantly. 
    The loonie has shed about 1 percent so far this week as
markets have been focused on trying to gauge when the U.S.
Federal Reserve might start to raise interest rates. 
    Heading into next week's Fed meeting, speculation has
increased that a rate hike could come sooner than markets have
been anticipating, which would benefit the greenback to the
detriment of the loonie.
    "There's a growing consensus that (the Fed) might alter the
forward guidance to remove the 'considerable time' phrasing
around when they're going to start tightening after they're done
tapering," said Bipan Rai, director of foreign exchange strategy
at CIBC World Markets in Toronto.
    The loonie was also weighed on by lower oil prices as Brent
crude dropped to a two-year low below $97 a barrel.
    The Canadian dollar was at C$1.1003 to the
greenback, or 90.88 U.S. cents, weaker than Wednesday's close of
C$1.0935, or 91.45 U.S. cents.
    It touched a session low of C$1.1021. Thursday is the third
day in a row the currency has pierced C$1.10, but so far it has
been unable to close at that weaker level.
    A close above C$1.10 could spell further gains for the
greenback against the loonie, with the C$1.1050 to C$1.1053
range the next big level to watch, Rai said.
    "We do see some weakness ahead in the next couple of months,
but we don't think we're going to get beyond this year's lows
for the Canadian dollar," he said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3 Canadian cents
to yield 1.138 percent and the benchmark 10-year up
27 Canadian cents to yield 2.176 percent.

 (Editing by Peter Galloway)