CANADA FX DEBT-C$ retreats as data weighs on global outlook

* C$ at C$0.9765 vs US$, or $1.0241
    * C$ touches C$0.9817 vs US$, weakest in nearly 2 weeks
    * U.S. jobless claims weaker than expected
    * Bond prices higher across curve

    By Solarina Ho
    TORONTO, Sept 20 (Reuters) - The Canadian dollar retreated
against the U.S. currency on Thursday, touching its weakest
level in nearly two weeks, after disappointing data from the
United States, China and Europe underscored concerns about
global economic growth.
    The number of Americans filing new claims for jobless
benefits held near two-month highs last week, suggesting some
weakening in labor market conditions, while the manufacturing
sector saw its weakest quarter in three years as foreign demand
for U.S. goods continued to fade. 
    Overseas, the downturn in activity in the euro zone's
service sector steepened this month at the fastest pace since
July 2009. 
    "The weaker euro zone data has tempered risk appetite a
little bit. As well, we saw weaker-than-expected U.S. jobless
claims figures, which cast some doubt on the health of the U.S.
recovery and the outlook for Canadian exports," said Sal
Guatieri, senior economist at BMO Capital Markets.
    Meanwhile, manufacturing in China contracted for an 11th
month in a row in September, according to a private sector
survey of factory managers. 
    Analysts said selling of the Canadian dollar by traders
looking to lock in recent gains was also a moderate factor.
    Canada's dollar finished its North American session
at C$0.9765 to the U.S. dollar, or $1.0241, weaker than
Wednesday's finish of C$0.9745, or $1.0262. Earlier, the
currency touched a low of C$0.9817, its weakest level since
Sept. 7.
    "Most people are still looking at C$0.9850, which seems to
be a nice technical level to play off on the rallies for now,"
said Darcy Browne, managing director, capital markets trading at
    The currency had been trading in a narrow range this week as
markets digested the implications of monetary policy changes in
the United States, Europe and Japan aimed at stimulating growth.
    "We're really just an observer here, trying to make sense of
it all," said Browne. 
    Canada's dollar has been trading at stronger-than-expected
levels, with some strategists attributing part of the currency's
performance to the Bank of Canada's hawkish stance, which stands
in marked contrast to other major central banks.
    CIBC revised its official targets for the Canadian dollar on
Thursday, forecasting the currency will touch C$0.96 in the
fourth quarter before slipping back to parity with the U.S.
dollar by the second quarter of 2013.
    The bank had previously pegged the currency to weaken to
C$1.02 in three months and trade around parity in six months,
according to a Reuters poll published earlier this month.
    Slower domestic growth, the likelihood international buying
of Canadian securities will ease off and the risk a Chinese
slowdown will hurt commodity prices could all contribute to
Canadian dollar weakness, the bank said on Thursday.
    Friday's inflation numbers are the only major piece of
domestic economic data due out this week. The Bank of Canada's
core annual inflation reading is expected to be 1.5 percent. The
central bank targets an inflation rate of 2 percent target.
    "That's comfortably below the Bank of Canada's overall
inflation target ... It just simply buys the Bank of Canada time
to remain on the sidelines as it assesses the uncertain global
outlook," said BMO's Guatieri, who added the strong dollar was
partly responsible for the low inflation rate.
    Canadian government bond prices rose across the curve. The
two-year bond climbed 2.5 Canadian cents to yield
1.146 percent, while the benchmark 10-year bond 
gained 25 Canadian cents, yielding 1.860 percent.