The Canadian dollar fell to its lowest level of the week versus the U.S. greenback on Wednesday
as a warning by a Bank of Canada official about the currency's strength continued to weigh.

Meanwhile, stronger-than-expected U.S. durables data boosted the greenback and added pressure on the already-softer Canadian unit.

On Tuesday, Bank of Canada Deputy Governor Timothy Lane sounded a warning that persistent Canadian dollar strength was threat to the economic recovery.

Along with a drop in oil prices, the currency skidded as low as C$1.0870 to the U.S. dollar, or 91.99 U.S. cents, on Tuesday. It extended the decline to as low as C$1.0935 to the U.S. dollar, or 91.45 U.S. cents, on Wednesday, and was one of the lagging performers versus the greenback.

This is just a hangover effect from the comments from Mr. Lane yesterday, which realistically is nothing new, said John Curran, senior vice president at CanadianForex, a commercial
foreign exchange dealing firm.

But while the Bank of Canada has said these things, I don't think they're about to dive in with both feet. There's no real need for it just now. As they said, everything else equal undue strength is not welcome.

Lane said the Bank of Canada has the tools at its disposal to handle the appreciating currency. But with Canadian interest rates at a low of 0.25 percent, the options are limited and most economists think the bank will confine itself to verbal intervention to get speculators to back off the currency.

Earlier this month, a red-hot Canadian dollar weakened briefly after Finance Minister Jim Flaherty said some steps could be taken to stop its rise.

At 8:40 a.m. (1240 GMT), it was at C$1.0905 to the U.S. dollar, or 91.70 U.S. cents, down from C$1.0858 to the U.S. dollar, or 92.09 U.S. cents, at Tuesday's close.

Canadian bond prices were relatively steady after the U.S. durables data, and added slight gains as U.S. stock futures pointed to a lower open.

The two-year bond CA2YT=RR rose 2 Canadian cents to C$99.44 to yield 1.285 percent, while the 10-year bond CA10YT=RR rose 7 Canadian cents to C$102.92 to yield 3.395 percent.

The 30-year bond CA30YT=RR was up 10 Canadian cents at C$118.60 to yield 3.897 percent.
(Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)