CANADA FX DEBT-Loonie falls after Canadian factory data disappoints

    * Canadian dollar falls 0.2% against the greenback
    * Canadian manufacturing sales decline 1.3% in July
    * Price of U.S. oil decreases by 1.3%
    * Bond prices rise across a flatter yield curve

    TORONTO, Sept 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday, approaching Friday's
nine-day low, as oil prices fell and domestic data showed a
bigger-than-expected drop in manufacturing sales for July.
    Canadian factory sales slid by 1.3% in July from June, far
exceeding the 0.3 percent decrease expected by analysts, as
plant maintenance shutdowns weighed on sales in the primary
metal and motor vehicle industries, Statistics Canada said.
    The price of oil, one of Canada's major exports, declined
but the market was on tenterhooks over the threat of retaliation
for attacks on Saudi Arabian crude oil facilities that halved
the kingdom's output and prompted a price spike not seen in
    U.S. crude oil futures        were down 1.3% at $62.06 a
    At 9:01 a.m. (1301 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3265 to the greenback, or 75.39 U.S.
cents. The currency, which on Friday notched its weakest
intraday level since Sept. 4 at 1.3291, traded in a range of
1.3236 to 1.3278.
    The decline for the loonie came as the market looked forward
to an interest rate decision by the U.S. central bank on
Wednesday. A rate cut is expected by investors but some market
watchers believe the Fed may then pause to wait for more
evidence of a U.S. economic slowdown.              
    Canada's inflation report for August is also due on
Wednesday, which could help guide expectations for the Bank of
Canada's interest rate outlook.           
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 2 Canadian cents to yield 1.614% and the 10-year
            was up 25 Canadian cents to yield 1.455%.
    On Friday, the 10-year yield touched its highest intraday in
eight weeks at 1.521%.

 (Reporting by Fergal Smith; Editing by David Gregorio)