CANADA FX DEBT-C$ strengthens as crude oil prices rally, retail sales jump
* Canadian dollar at C$1.4166 or 70.59 U.S. cents * Bond prices lower across the maturity curve By Fergal Smith TORONTO, Jan 22 (Reuters) - The Canadian dollar rallied against its U.S. counterpart Friday, extending gains following the Bank of Canada's steady rate decision mid-week, as crude oil prices rose and retail sales data suggested the economy was stronger than expected. Oil rose as a cold snap boosted demand for heating oil across the United States and Europe. A greater global appetite for risk was also supportive of the currency, according to Derek Holt, vice president of economics at Scotiabank. Rising expectations of monetary easing by central banks in Europe and Japan have prompted a strong recovery in global oil and stock markets. The market has reduced expectations for Bank of Canada rate cuts after the central bank decided on Wednesday to leave its policy rate at 0.50 percent, putting the onus on federal authorities to raise spending. "The Bank of Canada has signaled they have a higher threshold for acting soon and they have punted the ball to the federal government," said Holt. At 9:37 a.m. EST (1437 GMT), the Canadian dollar was trading at C$1.4166 to the greenback, or 70.59 U.S. cents, stronger than the Bank of Canada's official close of C$1.4279, or 70.03 U.S. cents. The currency touched its strongest level since Jan. 11 at C$1.4139, while its weakest level of the session was C$1.4300. Canadian retail sales jumped 1.7 percent in November, far more than expected, due to higher sales at new car dealers and Black Friday purchases, data from Statistics Canada showed. On the other hand, Canada's annual inflation rate edged up less than expected to 1.6 percent from 1.4 percent in November, Statistics Canada said. The core inflation rate continued to edge downward, falling to 1.9 percent from 2.0 percent the previous month. Canadian government bond prices were lower across the maturity curve, with the two-year price down 2.5 Canadian cents to yield 0.469 percent and the benchmark 10-year falling 52 Canadian cents to yield 1.325 percent. The Canada-U.S. two-year bond spread was 2.5 basis points more negative at -40.0 basis points as Treasuries underperformed at the front of the curve. (Editing by Bernadette Baum)
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