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By Solarina Ho TORONTO, Feb 22 (Reuters) - The Canadian dollar touched its weakest level against the U.S. dollar in almost eight months on Friday, following Canadian inflation and retail sales data that came in below forecast. Canada's annual inflation rate in January dropped to a three-year low of 0.5 percent from 0.8 percent in December, largely due to lower gas prices, while the country's retail sales unexpectedly plunged 2.1 percent in December amid slumping new-car sales and a weak Christmas shopping season. The data suggested that already moderate expectations for fourth quarter growth might be too optimistic and that the Bank of Canada is under no pressure to raise interest rates. "Basically this combination of data just piles on what had already been a weak footing for the Canadian dollar," said Doug Porter, chief economist at BMO Capital Markets. "Obviously the real eye-opener here was the retail sales result. We had been looking for a decline, but nothing on the order of that. And of course December just happens to be the most important month of the year for retailers." At 9:21 a.m. (or 1421 GMT), the Canadian dollar was at C$1.0245 versus the greenback, or 97.61 U.S. cents, after touching C$1.0255, or 97.51 U.S. cents, weaker than Thursday's North American session close at C$1.0187, or 98.16 U.S. cents. "As of the last couple of (data) releases, USD/CAD got a bid-tone an hour or so before the actual data was released," said David Bradley, director of foreign exchange trading at Scotiabank. "The market was positioning itself long-dollars well ahead of the 8:30 time frame." Bradley expected the Canadian dollar to trade between C$1.0230 and C$1.0275 on Friday and added the currency could trade as weak as C$1.0350 in the near term. It was also underperforming against all major currencies, including its commodities-linked counterpart, the Australian dollar, where it was trading at its weakest level in nearly 7 months. The price of a two-year Canadian government bond rose after the data, to 6 Canadian cents, yielding 1.076 percent, while the benchmark 10-year bond climbed 17 Canadian cents, yielding 1.964 percent.