CANADA FX DEBT-Pause in oil rout helps C$ bounce off 7-week low

(Adds currency trader comment, updates prices to close)
    * Canadian dollar settles at C$1.3160, or 75.99 U.S. cents
    * Loonie touches its weakest since July 27 at C$1.3236
    * Bond prices mixed as yield curve steepens

    By Alastair Sharp
    TORONTO, Sept 15 (Reuters) - The Canadian dollar recovered
from a seven-week low against its U.S. counterpart on Thursday
as a partial reversal of a recent oil price slump provided
support to the commodity-linked currency.
    "Oil had a rough start to the week," said Blake Jespersen,
managing director for foreign exchange sales at BMO Capital
Markets. "It's had a very modest rally today, so that's helped
the Canadian dollar recoup some of its losses." 
    The loonie, as Canada's currency is colloquially known, lost
more than 1 percent of its value in the first three days of the
week, as oil prices fell sharply on warnings from producer and
consumer groups that a glut will take longer to clear.
    The Canadian dollar settled at C$1.3160 to the
greenback, or 75.99 U.S. cents, stronger than Wednesday's close
of C$1.3197, or 75.77 U.S. cents.
    The currency's strongest level of the session was C$1.3131,
while it touched its weakest since July 27 at C$1.3236.
    Oil prices  rose about 1 percent after
shedding 6 percent in the past two days. 
    Jespersen said he expects Canadian dollar strength to stall
around C$1.27 or C$1.28, while it could weaken to C$1.35 if the
Federal Reserve moves closer to hiking U.S. interest rates and
commodity prices remain subdued.
    The U.S. dollar seesawed against a basket of major
currencies after retail sales and industrial production data
    Canadian household debt as a share of income hit a record
high in the second quarter, Statistics Canada data showed in a
report likely to reinforce concerns of overborrowing by
    Sales of existing Canadian homes fell 3.1 percent in August
from July, the fourth straight monthly decline and the largest
drop in nearly two years, a report from the Canadian Real Estate
Association showed. Still, actual sales, not seasonally
adjusted, were up 10.2 percent from August 2015. 
    Canadian government bond prices were mixed across the yield
curve. The two-year price rose 2 Canadian cents to
yield 0.575 percent, while the benchmark 10-year 
fell 12 Canadian cents to yield 1.200 percent.
    The curve steepened as the spread between the two- and
10-year yields widened by 2.4 basis points to 62.5 basis points,
indicating underperformance for longer-dated bonds.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and James