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CANADA FX DEBT-C$ ekes out gain, extending bounce from recent lows

* Canadian dollar at C$1.0977 or 91.10 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Feb 13 (Reuters) - The Canadian dollar firmed modestly against the greenback on Thursday, building on recent momentum that has helped the loonie bounce back from a sharp drop last month that many analysts now say was overdone.

One of the few domestic economic reports released this week showed new home prices in Canada rose 0.1 percent in December, as expected.

Data south of the border had more of an impact on the Canadian dollar, as an unexpected drop in U.S. retail sales for January pressured the currency earlier in the day before the loonie was able to push higher.

After a sharp sell-off in January that took the Canadian dollar to 4-1/2-year lows, the currency has bounced back to recoup about 1 percent since the start of February.

"Overall, I think (there is) a little bit more risk-appetite for the loonie," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto.

"People have felt that the U.S. dollar versus the Canadian dollar somewhat peaked a week or two ago and we're seeing the loonie have a little bit of momentum." The Canadian dollar ended the North American session at C$1.0977 to the greenback, or 91.10 U.S. cents, slightly weaker than Wednesday's close of C$1.0997, or 90.93 U.S. cents. The currency has gained in five of its last six sessions.

Nonetheless, the fundamentals that drove the loonie lower at the start of the year remain in place, particularly a Bank of Canada that is concerned about the weak inflation environment and is likely to keep rates low for some time. Most analysts expect there is more downside in store for the loonie.

"Certainly things have turned slightly more favorable for the Canadian dollar in February, but it doesn't erase it," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

"The overarching driver of weakness has been the Bank of Canada, in an environment where inflation data is particularly important." The C$1.0967 mark will be an important technical level, as a break through that level would suggest an accelerated downside in the U.S. dollar-Canadian dollar pairing, but a failure to crack it could provide support, said Sutton.

Canadian government bond prices were higher across the maturity curve, with the two-year up 3 Canadian cents to yield 1.019 percent and the benchmark 10-year up 23 Canadian cents to yield 2.460 percent.