* C$ weaker at C$1.0214 vs US$, or 97.90 U.S. cents * Retail sales expectedly drop in April * Canada tightens rules for mortgages and household borrowing * Bonds higher across curve By Jennifer Kwan TORONTO, June 21 (Reuters) - Canada's dollar weakened slightly against its U.S. counterpart on Thursday on investor concerns about global growth and domestic data that showed a surprise drop in retail sales in April. In another sign that Canadian second quarter growth could be unimpressive, retail sales in April posted a surprise 0.5 percent drop from March on general weakness. Analysts had predicted a 0.3 percent month-on-month increase. "That's negative in terms of how it flows into GDP," said Camilla Sutton, chief currency strategist at Scotiabank. Also in the spotlight, the Canadian government tightened rules for mortgages and household borrowing on Thursday to make it harder for home buyers and homeowners to take on massive debt in an attempt to cool the still hot domestic housing market. While the news is generally positive, the move could put downward pressure on the Canadian dollar as it might take pressure off the Bank of Canada to move quickly on interest rates, said Sutton. "From our perspective, it dampens the housing market. The positive side is that it dampens it as opposed to crushing a bubble that is allowed to just form year after year after year. Having a slow decline is much better than having a complete meltdown when a bubble is burst," she said. "It takes some of the pressure off the Bank of Canada," she added. Earlier this month, the Bank of Canada continued to signal it might have to raise interest rates, but it softened its recent hawkish language a bit in reaction to a sharp deterioration in global financial conditions sparked by renewed fears about Europe. At around 9:40 a.m. (1340 GMT), the Canadian dollar was at C$1.0214 versus the U.S. dollar, or 97.90 U.S. cents, down from Wednesday's finish at C$1.0192. The Canadian dollar had already been weaker heading into the North American session, tracking overseas markets. Sutton sees the currency trading in a range of C$1.0167 to C$1.0244 against the greenback. Rising concern about global growth triggered falls in shares and commodities on Thursday after data showed Chinese and European factory activity slowing and the Federal Reserve extended its stimulus policy due to a weakening U.S. recovery. Canadian bond prices were slightly higher across the curve, with Canada's two-year bond up 4 Canadian cents to yield 1.074 percent, while the benchmark 10-year bond was up 5 Canadian cents to yield 1.782 percent.