CANADA FX BONDS-C$ flat after tame CPI, hit 2009 high overnight

 * Hit 2009 high of 94.29 U.S. cents overnight

 * Softens after inflation data in line with expectations

 TORONTO, Sept 17 (Reuters) - The Canadian dollar softened
slightly against the U.S. currency on Thursday morning after
domestic data showed consumer prices fell in August.

 Shortly after the data, the Canadian unit CAD=CAD=D3
softened to around C$1.0642, or 93.97 U.S. cents, from
C$1.0625, or 94.12 U.S. cents just before the report. It hit an
overnight high of C$1.0606, or 94.29 U.S. cents, its strongest
level in a almost a year.

 Government data released on Thursday morning showed
Canadian consumer prices fell by 0.8 percent in August compared
with a year earlier, the second-largest 12-month drop in over
50 years, dragged down by falling gasoline prices. Core
inflation met expectations by ticking up 0.1 percent on the
month and 1.6 percent year-on-year. [ID:nN17185718]

 The report was largely in line with expectations and core
inflation, closely watched by the Bank of Canada, is expected
to remain muted for some time, said Matthew Strauss, senior
currency strategist at RBC Capital Markets.

 "The move that we saw in the currency market had very
little to do with the CPI. Maybe some positioning ahead of the
number," he said.

 "As the number came in line with expectations there wasn't
any big movement from the currency, or limited movement from
the currency side."

 Another factor contributing to Canadian dollar softness was
weak oil prices, as oil is a key Canadian export. [O/R]

 At 7:32 a.m. (1132 GMT), the Canadian dollar was little
changed at C$1.0650 to the U.S. dollar, or 93.90 U.S. cents,
down slightly from Wednesday's close at C$1.0649 to the U.S.
dollar, or 93.91 U.S. cents.

 BONDS LOWER

 Canadian bond prices slipped across most of the curve,
extending losses seen in the previous session as world stocks
continued their ascent on Thursday.

 The two-year bond CA2YT=RR slipped 3 Canadian cents to
C$99.42 to yield 1.303 percent, while the 10-year bond
CA10YT=RR fell 10 Canadian cents to C$102.90 to yield 3.395
percent. The 30-year bond CA30YT=RR sagged 5 Canadian cents
to C$118.75 to yield 3.888 percent.
 (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)