* C$ slumps to C$0.9813 to the U.S. dollar, or $1.0191
* Falls as low as C$0.9829, lowest since June 3
* Bonds mostly firmer as risk-off sentiment returns
* Canada two-year bond auction nets decent demand (Updates to early afternoon)
By Ka Yan Ng
TORONTO, June 15 (Reuters) - The Canadian dollar fell hard against its U.S. counterpart on Wednesday, pressured by weak Canadian and U.S. data and renewed concerns that the Greek debt crisis could escalate.
Meantime, government bond prices rallied across the curve in a flight to safety.
In tandem with stock markets and commodity prices, the Canadian dollar fell more than a penny from the previous close to as low as C$0.9829 to the U.S. dollar, or $1.0174, its weakest level since June 3.
That was also not far off C$0.9850, which traders said they were eyeing as a key level that, if broken, could spawn the next leg of Canadian dollar weakness.
"That's a big level for dollar/Canada," said Fergal Smith, managing market strategist at Action Economics.
Data on Wednesday showed the U.S. economy is facing a troubling mix of higher prices and weak growth. Underlying U.S. inflation rose to its highest level in nearly three years in May, while a regional factory gauge posted a surprise contraction this month. [ID:nN15281293]
The picture was also soft in Canada as manufacturers saw sales slip 1.3 percent in April, as expected, reversing much of March's gains as the Japanese earthquake cut off supplies to the auto industry. [ID:nN15132944]
"Today's weak print provides a cautious reminder that the pace of economic growth is slowing in Canada," said Mazen Issa, a macro strategist at TD Securities in a research note.
Euro zone finance ministers failed to agree how to make private creditors contribute to a second bailout for Greece. A senior Greek government source said Prime Minister George Papandreou told the head of the conservative opposition he would be willing to step down and make way for a national unity government. [ID:nLDE75E0JC]
Bank of Canada Governor Mark Carney is speaking in Vancouver later Wednesday afternoon about the country's housing market, with investors looking for comments on the impact of low interest rates on household borrowing.
Carney's comments are expected to be biased to the hawkish side, which could support the Canadian dollar later today.
Any comments on the Canadian dollar and whether the Bank of Canada believes it is too strong will also be parsed.
"As much as they don't want the Canadian dollar down here, I think they realize there's not much they can do about it. It's more of a global flow aspect to what's going on with the Canadian dollar. The drivers are not really controlled domestically," said said Darcy Browne, managing director, capital markets trading, at CIBC, adding that a lot of money is currently on the sidelines.
At 1:07 p.m. (1707 GMT), the currency CAD=D4 stood at C$0.9813 to the U.S. dollar, or $1.0191, down from Tuesday's North American finish of C$0.9689 to the U.S. dollar, or $1.0321.
The interest rate-sensitive two-year bond CA2YT=RR jumped 12 Canadian cents to yield 1.443 percent, while the 10-year bond CA10YT=RR gained 75 Canadian cents to yield 2.981 percent.
Canada's sale of two-year government bonds met with decent demand, though the bid-to-cover ratio was the lowest this year. [ID:nN15271648] (Additional reporting by Solarina Ho; editing by Rob Wilson)