CANADA FX DEBT-C$ flat versus US$, further weakness eyed

* C$ at C$1.3248, or 75.48 U.S. cents
    * Bond prices lower across maturity curve

    By Alastair Sharp
    TORONTO, Sept 10 (Reuters) - The Canadian dollar was flat
versus its U.S. counterpart on Thursday as domestic data showed
industrial capacity use fell for a second straight quarter with
low oil prices and a slower economy expected to weigh on the
currency in coming weeks. 
    At 9:21 a.m. ET (1321 GMT), the Canadian dollar was
trading at C$1.3248 to the greenback, or 75.48 U.S. cents,
compared to the Bank of Canada's official Wednesday close of
C$1.3250, or 75.47 U.S. cents.
    "The price (of oil) has been drifting lower ... that's
encouraged dollar/Canada to squeeze up through C$1.32," said
Jeremy Stretch, head of foreign exchange strategy at CIBC World
    U.S. crude prices were up 1 percent to $44.62 a
barrel, while Brent crude added 0.7 percent to $47.91 a
barrel. Brent had reached $54 in late August, while U.S.
crude approached $50 at the same time.
    Stretch said further weakness likely lies ahead for the
Canadian currency, with C$1.35 a possibility by year-end.
    "If you look at the monetary policy differentials - we're
still of the view that the Fed will go next week - inherent
political risk into the upcoming election, and the growth
differentials ... I'd still be biased towards a higher
dollar/Canada," he said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down half a
Canadian cent to yield 0.459 percent and the benchmark 10-year
 falling 6 Canadian cents to yield 1.497 percent.
    The Canada-U.S. two-year bond spread was -28.2 basis points,
while the 10-year spread was -70.9 basis points.

 (Editing by Nick Zieminski)