* 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 decades. U.S. crude oil futures were down 1.3% at $62.06 a barrel. 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)
Our Standards: The Thomson Reuters Trust Principles.