CANADA FX DEBT-C$ ends volatile session lower, bonds firm
* Canada July retail sales slip unexpectedly
* Oil price turnaround pressures C$
* C$ falls to 97.11 U.S. cents, bonds remain firm (Updates to close)
By Ka Yan Ng
TORONTO, Sept 22 (Reuters) - The Canadian dollar slid against the U.S. currency on Wednesday, pressured by a falling oil price and renewed fears that the domestic economy is stumbling after disappointing retail sales data.
Data showed Canadian retail sales dropped unexpectedly in July, the fourth straight month of flat or declining sales. The slide suggested the consumer is no longer one of the main drivers of the recovery and the data could give the Bank of Canada another reason to take a break from raising interest rates.
A rising oil price had earlier wiped out the currency's data-related losses, but oil became a dampening factor after inventory data showed a rise in crude and oil product stocks and prices fell. [O/R]
The Canadian dollar swung in a wide range, hitting a six-week high and a 1-1/2 week low during the overnight and morning sessions, rising on euphoria from the U.S. Federal Reserve's pledge to stand ready to help the economy if needed, and falling on the Canadian retail data.
The Canadian dollar CAD=D3 finished at C$1.0298 to the U.S. dollar, or 97.11 U.S. cents, down from Tuesday's finish at C$1.0268 to the U.S. dollar, or 97.39 U.S. cents.
In the overnight session it hit a six-week high of C$1.0191 to the U.S. dollar, or 98.13 U.S. cents.
"The Canadian dollar rally ended rather abruptly," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
"It failed spectacularly at C$1.02 in part because of (an) option barrier being defended. Disappointing retail sales data added to the sentiment and widespread selling of Canada against the crosses."
Statistics Canada said total retail sales in July edged 0.1 percent lower, instead of the 0.6 percent rise expected by the market. The June retail sales figure was also revised lower to show a flat reading versus the 0.1 percent gain Statscan initially estimated. [ID:nN22229778]
"Overall, it was just a very soft data release and it followed already two other weak data releases for July -- wholesale sales and manufacturing sales," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"July is setting up to be a quite disappointing month and next week's GDP numbers will probably confirm that it's a pretty slow start to the third quarter."
The retail figures prompted market players to further price out chances of more hikes by the Bank of Canada, providing a boost to government bond prices.
Market pricing, as measured by a Reuters calculation of yield on overnight index swaps, indicated about a 76 percent likelihood of no change in interest rates at the Bank of Canada's policy-decision date next month, up from around 64 percent on Tuesday afternoon. BOCWATCH
The two-year government of Canada bond added 7 Canadian cents to yield 1.423 percent, while the 10-year bond gained 23 Canadian cents to yield 2.871 percent.
No more Canadian data is due for release this week, which puts market focus squarely on Thursday's figures for U.S. existing-home sales and the leading indicator, both for August, and the weekly jobless claims. (Reporting by Ka Yan Ng; editing by Peter Galloway)
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