CANADA FX DEBT-C$ hits 3-month high vs US$, record vs euro

* Canada dollar ends at C$0.9890 vs US dollar, or $1.0111
    * C$ hits session high of C$0.9887 vs US$, or $1.0114
    * C$ rallies to record high against euro
    * Bond prices fall across the curve

    By Solarina Ho
    TORONTO, Aug 15 (Reuters) - The Canadian dollar hit its
highest level against its U.S. counterpart in more than three
months on Wednesday and climbed to a record peak against the
euro after U.S. economic data supported the possibility of
further stimulus by the U.S. Federal Reserve.
    U.S. consumer prices were flat in July for a second straight
month and the year-over-year increase was the smallest in more
than 1-1/2 years, giving the Fed room to ease policy further to
tackle high unemployment. 
    The Canadian currency advanced against many of its peers,
including a broadly weaker euro. The euro hit a record
trough of C$1.2135 against the Canadian dollar, or 82.41 euro
    The Canadian dollar hit an intraday high C$0.9887
versus the U.S. dollar, or $1.0114, its strongest level since
May 4.
    The currency closed at C$0.9890 against the greenback, or
$1.0111, up from Tuesday's North American session close at
C$0.9919, or $1.0082. 
    "I think people ... are surprised by the consistent strength
of the Canadian dollar," said David Bradley, director of foreign
exchange trading at Scotiabank, who also noted an interest to
sell USD/CAD around the London fix.
    A recent slew of supportive economic data, global stimulus
hopes and comments by the Bank of Canada have combined to power
the Canadian dollar toward May highs.
    "It seems like Canada's going to continue to do better,"
said Bradley.
    The Canadian dollar was also notably stronger versus its
commodity-linked counterparts, touching a one-month high against
the Australian dollar.
    The Aussie dollar was hurt after Moody's ratings agency said
it might eventually downgrade the credit ratings of some
Australian states. 
    "We are seeing continued outperformance of North American
currencies," said Audrey Childe-Freeman, head of foreign
exchange strategy for BMO Capital Markets in London. 
    "I like to play the bullish Canadian dollar view on the
crosses and in particular against the Aussie dollar," she added.
    Canadian bond prices retreated, underperforming U.S.
Treasuries as investors weighed whether the Fed is likely to
launch new stimulus in September and as concerns over Europe
ebbed with a lack of new, negative headlines. 
     The two-year bond slid 12 Canadian cents to
yield 1.248 percent, and the benchmark 10-year bond 
dropped 76 Canadian cents to yield 1.943 percent.