U.S. Markets closed

CANADA FX DEBT-Loonie hits three-month low on China data

* Canadian dollar at C$1.0960 or 91.24 U.S. cents * Bond prices mixed (Adds strategist's comments, updates prices) By Alastair Sharp TORONTO, Aug 5 (Reuters) - The Canadian dollar hit its weakest level against the greenback in three months on Tuesday, extending its recent retreat as commodity prices dropped after sluggish Chinese growth data reignited investor fears about the health of the world's second-biggest economy.

The Canadian dollar is often sensitive to economic news from China, a key consumer of resources.

"It helps that the commodities are a little bit softer. Gold trading back below $1,300 and crude trading back below $100 has probably added to interest to sell Canadian dollars," said David Bradley, director of foreign exchange trading at Scotiabank.

The loonie has shed 2.8 percent since the beginning of July as optimism that U.S. economic recovery is gaining momentum has prompted investors to snap up the greenback.

Bradley said the Canadian dollar could weaken toward the C$1.1050 level, which has proven tough to punch through, if domestic jobs figures for July, due on Friday, disappoint.

"The Canadian employment data this Friday, that's going to be the next catalyst. If that comes out soft, then it could easily see us trading up towards that level (C$1.1050)." The Canadian dollar ended the day at C$1.0960 to the greenback, or 91.24 U.S. cents, weaker than Friday's official Bank of Canada close of C$1.0926, or 91.52 U.S. cents.

At one point it hit C$1.0977, its weakest since May 5.

The latest catalyst was data overnight that showed growth in China's services sector slowed to a nine-year low in July.

"With China potentially slowing down or not stabilizing to the extent that the government would like it to, that would put pressure on their export demand, which would in turn harm the loonie, which is why we're seeing a bit of weakness," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

Many market participants in Canada were away on Monday for the Civic Holiday.

The longer the U.S. dollar-Canadian dollar stays above the C$1.09 level and its 200-day moving average around C$1.0850, the more that will create upward momentum for the currency pairing, Smith said.

In addition to the Friday jobs data, investors will also get a June trade balance report to digest on Wednesday.

Canadian government bond prices were mixed, with the two-year off 1-1/2 Canadian cents to yield 1.079 percent and the benchmark 10-year up 5 Canadian cents to yield 2.112 percent.

(Additional reporting by Leah Schnurr; Editing by Bernadette Baum; and Peter Galloway)