* Canadian dollar at C$1.1124 or 89.90 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Jan 23 The Canadian dollar tumbled to a 4-1/2-year low against the greenback on Thursday, breaking through the C$1.11 level as it was hit by dovish language from the Bank of Canada and a contraction in China's vast manufacturing industry. The battered loonie got some relief from data that showed a larger than expected rise in Canadian retail sales in November, which helped the currency trim declines. Still, the Canadian dollar remained under pressure for the third session in a row. Selling intensified on Wednesday after the Bank of Canada said it has become more concerned about weak inflation and left the door open to a rate cut. "The slightly dovish slant to the (Bank of Canada's) Monetary Policy Report has definitely given the loonie bears the green light to go ahead and continue to hit the sell button," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. "While markets were fairly positioned to see a neutral to dovish slant from the Bank of Canada, this is just reaffirming markets' expectations that the path for U.S. dollar-Canadian dollar higher is still intact and we're not going to see anything from the Bank of Canada or Canadian policymakers that is going to jeopardize (the trend)," said Smith. While the Bank of Canada noted the stimulative impact on exports and economic growth from the Canadian dollar's recent depreciation, the bank also said the currency was still strong and that its strength still posed an obstacle to exports. "It feeds back into this (idea), We're happy with the price action of how U.S. dollar-Canadian dollar has unfolded and we won't try and step in if the Canadian dollar continues to weaken because that's only going to help improve our terms of trade," said Smith. The Canadian dollar was at C$1.1124 to the greenback, or 89.90 U.S. cents, weaker than Wednesday's close of C$1.1088, or 90.19 U.S. cents. It traded as low as C$1.1174 overnight, its lowest level since July 2009. The C$1.12 area should act as a cap for the remainder of the week, said Smith. The Canadian currency was also pressured by data overseas that showed activity in China's manufacturing industry contracted for the first time in six months. Focus will start to turn to Friday's domestic inflation report, which could be a significant driver for the loonie. The annualized inflation rate is forecast to pick up to 1.3 percent in December. Canadian government bond prices were higher across the maturity curve, with the two-year up 4-1/2 Canadian cents to yield 0.986 percent while the benchmark 10-year was up 43 Canadian cents to yield 2.437 percent.