CANADA FX DEBT-Loonie recovers from 2-week low as Fed calms funding market

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    * Canadian dollar hits a near two-week low at 1.3300
    * Canadian manufacturing sales decline 1.3% in July
    * Price of U.S. oil decreases 5.7%
    * Bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Sept 17 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Tuesday, with the
currency recovering from a near two-week low hit after
weaker-than-expected domestic factory data as the greenback
broadly declined.
    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 data suggested that Canada's economy has not been able
to escape headwinds to global trade, said Scott Lampard, head of
global markets at HSBC Bank Canada.
    "The Canadian economy is exhibiting a little bit of fatigue
because it is swimming upstream," Lampard said.
    The Bank of Canada has shown no appetite for cutting
interest rates even as some of its global peers have eased.
Still, the central bank expects economic growth to slow after a
rapid pace of activity in the second quarter.
    "If you begin to see a bit of an accumulation of data points
that confirm that the Canadian economy seems to be slowing...
that's where you get the bank doing something that might be a
little bit more aggressive than people had thought," Lampard
    Canada's inflation report for August is due on Wednesday and
could help guide expectations for the central bank's interest
rate outlook.           
    At 4:50 p.m. (2050 GMT), the Canadian dollar          was
trading little changed at 1.3243 to the greenback, or 75.51 U.S.
cents. The currency touched its weakest intraday level since
Sept. 4 at 1.3300.
    The U.S. dollar        fell against a basket of major
currencies after the New York Federal Reserve said it would
conduct a repurchase operation in a bid to lower funding costs,
which had earlier climbed as much as 10%.
    The U.S. central bank is expected to cut interest rates on
    The price of oil, one of Canada's major exports, declined
after Saudi Arabia's energy minister said the kingdom would 
fully restore by the end of the month its oil production, hit by
an attack this weekend that shut 5% of global oil output.
    U.S. crude oil futures        settled 5.7% lower at $59.34 a
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            rose 28 Canadian cents to yield 1.451%.

 (Reporting by Fergal Smith; Editing by David Gregorio and Dan