* Canadian dollar at C$1.1099 or 90.10 U.S. cents * Bond prices higher across maturity curve By Leah Schnurr TORONTO, Jan 23 (Reuters) - The Canadian dollar touched a 4-1/2-year low against the greenback on Thursday as it was hit by dovish language from the Bank of Canada and a contraction in China's vast manufacturing industry. The battered loonie was able to claw back some of its declines after the low touched in trading overnight, helped by a larger-than-expected rise in Canadian retail sales in November. Still, the Canadian dollar remained under pressure for the third session in a row. Selling had intensified on Wednesday after the Bank of Canada said it has become more concerned about weak inflation and left the door open to a rate cut. "The slightly dovish slant to the (Bank of Canada's) Monetary Policy Report has definitely given the loonie bears the green light to go ahead and continue to hit the sell button," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. While the Bank of Canada noted the stimulative impact on exports and economic growth from the Canadian dollar's recent depreciation, the central bank also said the currency was still strong and that its strength posed an obstacle for exports. "The market looked at that statement and said to themselves, 'The Bank is not concerned about the swift devaluation of the currency,' and generally speaking, market animal forces will generally say, 'Lets see how far we can push this,'" said Brad Schruder, director of foreign exchange sales at BMO Capital Markets in Toronto. "That's one of the reasons why there are three trades to play when it comes to Canada: you can be on the sidelines; you can be a tiny short, or you can be very short. But being long Canada is probably the most perilous position I'd say in all currency markets right now." The Canadian dollar ended the North American session at C$1.1099 to the greenback, or 90.10 U.S. cents, weaker than Wednesday's close of C$1.1088, or 90.19 U.S. cents. It traded as low as C$1.1174 overnight, its lowest level since July 2009. The Canadian currency was also pressured by data overseas that showed activity in China's manufacturing industry contracted for the first time in six months. The loonie has been on a downward path since late October last year when the Bank of Canada shifted policy gears by dropping any mention of interest rate hikes after 18 months of signaling policy tightening was on the horizon. The Canadian currency has dropped more than 7 percent since then. With the Bank of Canada's concern about the weak inflation environment, Friday's domestic inflation report could be a significant driver for the currency. The annualized inflation rate is forecast to pick up to 1.3 percent in December. Canadian government bond prices were higher across the maturity curve, with the two-year up 8 Canadian cents to yield 0.971 percent, the first time it has fallen below 1 percent since May 2013. The benchmark 10-year was up 64 Canadian cents to yield 2.411 percent.