* 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 cents. 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.