CANADA FX DEBT-C$ lowest vs US$ since May 2010 as rout continues

* Canadian dollar at C$1.0806 or 92.54 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 8 (Reuters) - The Canadian dollar fell to its
lowest against the greenback in 3-1/2 years 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 strong 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 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
    The Canadian dollar was at C$1.0806 to the
greenback, or 92.54 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. 
    It has been on a downward path since late October when the
Bank of Canada shifted to a more neutral policy stance, and many
analysts expect the currency to come under more pressure in
    "We were in a range for U.S. dollar-Canadian dollar for over
month, and that range was pretty narrow," Sutton said.
    "So yesterday when we were able to break above it, that just
added to pent-up momentum for upside in U.S. dollar-Canadian
    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. 
    Later on Wednesday, minutes are set to be released from the
most recent U.S. Federal Reserve meeting, in which the central
bank decided to begin paring back its bond purchases. The
minutes will be parsed for any clues as to how quickly the
program may be unwound.
    Canadian government bond prices were mostly lower across the
maturity curve, though the two-year was up half a
Canadian cent to yield 1.107 percent. The benchmark 10-year
 was down 27 Canadian cents to yield 2.717 percent.