CANADA FX DEBT-C$ hits two-week low on lower oil, soft data

    * Canadian dollar at C$1.3185, or 75.84 U.S. cents
    * Loonie touches weakest since Feb. 7 at C$1.3210.
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, Feb 22 (Reuters) - The Canadian dollar weakened to
a two-week low against its U.S. counterpart on Wednesday,
pressured by falling oil prices and broader gains for the
greenback along with the biggest drop in domestic retail sales
in nine months.
    Canadian retail sales unexpectedly declined 0.5 percent in
December as consumers bought fewer new cars and spent less
during the holiday shopping season, data from Statistics Canada
showed. Economists had expected retail sales to be unchanged.
    "It's generally soft data," said Andrew Kelvin, senior rates
strategist at TD Securities.  
    It reinforces the view that the Bank of Canada will not be
following the Federal Reserve with interest rate hikes, he
    The chances of a Bank of Canada interest rate hike this year
dipped to 25 percent from more than 30 percent before the retail
sales report, data from the overnight index swaps market showed.
    U.S. crude        prices were down 1.27 percent at $53.64 a
barrel as the U.S. dollar       , in which payments for crude
are made, strengthened.
    Oil is one of Canada's major exports.
    The greenback climbed against a basket of major currencies
ahead of minutes of the Fed's latest meeting, while Europe's
political woes kept a bruised euro under pressure.        
    At 9:28 a.m. ET (1428 GMT), the Canadian dollar          was
trading at C$1.3185 to the greenback, or 75.84 U.S. cents,
weaker than Tuesday's close of C$1.3138, or 76.12 U.S. cents.
    The currency's strongest level of the session was C$1.3109,
while it touched its weakest since Feb. 7 at C$1.3210.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries and German Bunds.
    The two-year            price rose 4 Canadian cents to yield
0.768 percent and the 10-year             climbed 33 Canadian
cents to yield 1.684 percent.
    Canada's inflation report for January is due on Friday, with
economists expecting the annual rate to edge up to 1.6 percent.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)