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* Canadian dollar weakens after early rise
* Bonds mostly higher across the curve
* Canada retail sales drop more than expected
* (Adds details, quote)
TORONTO, Feb 23 (Reuters) - The Canadian dollar weakened versus the U.S. dollar late on Monday morning, hit by data that showed a big drop in December retail sales.
Canadian retail sales tumbled 5.4 percent in December, the biggest monthly drop since 1991 and more than twice what was expected. [ID:nN23330217]
"What takes precedence is the dismal retail sales numbers that we got this morning," said Charmaine Buskas, senior economics strategist, TD Securities.
"They definitely confirm that the Canadian economy is under a lot of pressure and it certainly assures the markets that another rate cut is coming from the Bank of Canada."
The data put more pressure on the central bank to cut its key overnight rate by another half-point on March 3 to 0.50 percent. [ID:nN23330217]
At 11:46 a.m. (1646 GMT), the Canadian dollar was at C$1.2506 to the U.S. dollar, or 79.96 U.S. cents, down from Friday's Bank of Canada closing level at C$1.2493 to the U.S. dollar, or 80.04 U.S. cents.
At its weakest point, the Canadian dollar hit 1.2558, or 76.63 U.S. cents, while at its highest point in the overnight session, the Canadian dollar was at C$1.2350 to the U.S. dollar, or 80.97 U.S. cents.
Canadian bond prices were mostly higher across the curve, as the retail sales figures pushed money out of equity markets and into safer government debt, analysts said.
"(The data) signals that Canadian consumers are in deep hibernation, fearful of the economic outlook and job prospects," said Sal Guatieri, senior economist at BMO Capital Markets.
The interest-rate sensitive two-year bond was up 5 Canadian cents at C$102.71 to yield 1.193 percent, while the 10-year bond rose 30 Canadian cents to C$111.45 to yield 2.835 percent.
The 30-year bond climbed 50 Canadian cents to C$125.30 to yield 3.571 percent. (Reporting by Ka Yan Ng and Jennifer Kwan; Editing by Peter Galloway)