* Canadian dollar at C$1.0804 or 92.56 U.S. cents * Bond prices mostly lower across the maturity curve By Leah Schnurr TORONTO, Jan 8 (Reuters) - The Canadian dollar hit a new 3-1/2-year low against the greenback on Wednesday, weakening for a third straight day and underscoring market expectations that the loonie will be pressured further in 2014. The currency was also hurt by strength in the U.S. dollar after data showed the U.S. private sector added more jobs than expected in December. The report boded well for the more comprehensive official unemployment figures due at the end of the week. Wednesday's decline pushed the Canadian dollar through the C$1.08 level and extended a rout started in the previous session when data showed a steep widening of the Canada's trade deficit and a contraction in a gauge of purchasing activity. "It certainly feeds the market sentiment that for at least the first quarter or two of the year, the Canadian dollar is going to be under pressure," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. Analysts said the data raised some concerns the Canadian economy could underperform the recovery in the United States, leaving the Bank of Canada on hold as the U.S. Federal Reserve gradually unwinds its economic stimulus. "It highlights the vulnerabilities of Canada," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. "One is that our export sector hasn't recovered at the pace the Bank of Canada had expected it to, and that there is a large question mark overhanging it in terms of will it be able to provide the contribution to growth that is expected for 2014." "The second piece is what is going on in the Canadian oil sector and what will take place as U.S. domestic production increases." The Canadian dollar ended the North American session at C$1.0804 to the greenback, or 92.56 U.S. cents, weaker than Tuesday's close of C$1.0772, or 92.83 U.S. cents. The loonie traded as low as C$1.0829 early in the morning, its lowest level since May 2010. The currency has been on a downward path since late October when the Bank of Canada shifted to a more neutral policy stance. Analysts cut their forecasts for the currency in a Reuters poll released Wednesday, which sees the Canadian dollar trading at C$1.09 in 12 months from now. Bank of Canada Governor Stephen Poloz said on Tuesday the central bank should keep its key interest rate on hold until economic data persuades it otherwise. Along with the likelihood rates will stay low for some time, the reduction of economic stimulus south of the border is expected to weigh on the loonie. Minutes from the U.S. Federal Reserve's December meeting released on Wednesday showed the central bank's top officials were keen to steer a delicate path as they debated their decision to scale back the Fed's economic stimulus program. It was after last month's meeting that the central bank announced it would be reducing its bond purchases to $75 billion a month, catching some in the market by surprise. Canadian government bond prices were mostly lower across the maturity curve, though the two-year was up 0.6 Canadian cent to yield 1.107 percent. The benchmark 10-year was down 33 Canadian cents to yield 2.725 percent.