CANADA FX DEBT-C$ hits 3-week low, but oil gives some support
* C$ comes off three-week low, ends at 91.60 U.S. cents
* Falls for third straight session, down 2 pct on week
* Bond prices head higher on weak stocks (Updates to close)
TORONTO, Sept 25 (Reuters) - Canada's currency fell to its lowest against the U.S. dollar in three weeks before recovering slightly on Friday, as further signs of U.S. economic weakness were partly offset by a jump in oil prices.
Weakening for a third day in a row, the Canadian dollar finished at C$1.0917 to the U.S. dollar, or 91.60 U.S. cents, down from C$1.0890 to the U.S. dollar, or 91.83 U.S. cents, at Thursday's close.
It had dropped as low as 91.05 U.S. cents, its lowest since Sept. 4, after U.S. economic data showed new orders for durable goods fell unexpectedly in August. [ID:nN25493668] Evidence of U.S. economic weakness often hurts the Canadian dollar because of Canada's reliance on trade with the United States.
A slump in oil prices weighed on the currency earlier in the session but as the commodity steadied above $66 a barrel helped the Canadian dollar narrow its decline.
Oil prices rose slightly after U.S. President Barack Obama accused Iran, an OPEC member, of building a secret nuclear fuel plant. [O/R]
Canada is a major oil exporter and its currency often moves in line with prices for the commodity. Meanwhile, stocks also managed to struggle back from session lows. [.TO]
The Canadian dollar has flagged since midweek when the U.S. Federal Reserve said U.S. economic recovery is under way and central banks said they will pare injections of dollar liquidity.
The Canadian currency headed lower on Thursday when it pushed through the C$1.0864 barrier on high volume, said George Davis, chief technical analyst at RBC Capital Markets.
"Sentiment is changing vis-a-vis Canada," he said. "I think the bias will be for a weaker Canadian dollar into next week based on what's taken place over the last three days."
The currency's recent weakness could take the threat of central bank intervention off the table for the time being, Davis added.
In an interview published on Thursday, Bank of Canada Governor Mark Carney said the central bank may resort to unorthodox policies if it believes the rising Canadian dollar poses a threat to its inflation target. [ID:nN24475596]
BOND PRICES MOSTLY HIGHER
With no major domestic data readings on Friday, Canadian bond prices headed higher on the weakness in equity markets.
The two-year bond CA2YT=RR was off 2 Canadian cents at C$99.48 to yield 1.269 percent, while the 10-year bond CA10YT=RR gained 30 Canadian cents to C$103.18 to yield 3.361 percent.
The 30-year bond CA30YT=RR was up 40 Canadian cents at C$118.85 to yield 3.882 percent.
(Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)
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