*

Canadian dollar falls 0.2% against the greenback

*

Touches its weakest since September 12 at 1.3849

*

Price of U.S. oil settles 1.8% higher

*

Bond yields edge lower across the curve

By Fergal Smith

TORONTO, Sept 23 (Reuters) - The Canadian dollar

weakened to an 11-day low against its U.S. counterpart on

Tuesday, as the Bank of Canada vowed to support the domestic

economy and recent widening of interest rate spreads pressured

the currency.

The loonie was trading 0.2% lower at 1.3840 per U.S.

dollar, or 72.25 U.S. cents, after touching its weakest intraday

level since September 12 at 1.3849.

"It's been a slow grind ... but we haven't materially moved

out of the range that's been in place since the middle of

August," said Amo Sahota, director at Klarity FX in San

Francisco.

Recent widening of Canada-U.S. interest rate spreads has

contributed to negative sentiment toward the loonie, Sahota

added.

The Canadian 2-year yield was trading about 114 basis points

below the equivalent U.S. rate, compared to a gap of 92 basis

points near the end of August. Investors tend to favor the

higher-yielding currency.

The Bank of Canada will support economic growth while ensuring

inflation remains well controlled, Governor Tiff Macklem said,

speaking less than one week after the central bank cut interest

rates for the first time since March.

Investors see a roughly 50% chance the BoC will ease again at

its next policy decision on October 29, overnight index swaps

data showed.

The price of oil, one of Canada's major exports, settled 1.8%

higher at $63.41 a barrel after a deal to resume exports from

Iraq's Kurdistan stalled.

Canadian bond yields edged lower across the curve. The 10-year

was down 0.7 basis points at 3.193%.