CANADA FX DEBT-C$ stronger after again failing to stick at C$1.10

* Canadian dollar at C$1.0935 or 91.45 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds strategist comment, updates prices to close)
    By Alastair Sharp
    TORONTO, Sept 10 (Reuters) - The Canadian dollar gained
against the greenback on Wednesday after a second straight foray
above C$1.10 failed to hold in trade that was mostly propelled
by the U.S. dollar side of the equation.
    The Canadian dollar had fallen earlier this week, hurt by
broad demand for the greenback sparked by a U.S. Federal Reserve
study that showed investors expect the central bank to keep
rates lower for longer than policymakers themselves expect.
    "More than anything, the pullback in dollar/Canada is
probably more to do with the currency not able to close above
that C$1.10 threshold yesterday," said Greg Moore, a senior
currency strategist at Royal Bank of Canada. "For the short term
it means we need a bit of a reload, a bit of a pullback."
    Moore said that "the threat is still a clear and present
danger," but would need a catalyst such as surprises in U.S.
retail sales data due later this week, or domestic inflation and
Bank of Canada and Federal Reserve events next week.
    The currency ducked under C$1.10 soon after data showed that
domestic industrial capacity rose in the second quarter and
strengthened throughout the day, though the mostly second-tier
domestic economic data on tap this week was not expected to be a
significant driver of the currency. 
    The Canadian dollar ended the session changing
hands at C$1.0935 to the greenback, or 91.45 U.S. cents,
stronger than Tuesday's close of C$1.0971, or 91.15 U.S. cents.
    The loonie touched a low of C$1.1014 in overnight trading
but was unable to hold the C$1.10 mark, which has acted as
technical resistance several times in August. 
    Although the fundamentals point to a weaker loonie, there
could be the potential for a U.S. dollar pullback after two
months of gains, said Shaun Osborne, chief currency strategist
at TD Securities in Toronto.
    "There's been an uninterrupted rally in the U.S. dollar that
is really quite unusual. It's rare that we see these moves for
more than eight weeks or so without some sort of correction
forming," Osborne said.
    "I rather think that although a lot of things suggest U.S.
dollar-Canadian dollar should be higher, we may struggle to
really push on through C$1.10 here at the moment."
    While Osborne still expects to see the loonie fall to C$1.12
by the end of the year, the currency could consolidate to around
C$1.08 in the next couple of weeks, he said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 2 Canadian
cents to yield 1.150 percent and the benchmark 10-year
 down 23 Canadian cents to yield 2.203 percent.

 (Additional reporting by Leah Schnurr; Editing by Chizu
Nomiyama and Meredith Mazzilli)