CANADA FX DEBT-C$ retreats as price of oil sinks to 10-month low

    * Canadian dollar at C$1.3318, or 75.09 U.S. cents
    * Loonie touches its weakest since Thursday at C$1.3348
    * Bond prices higher across yield curve
    * Bank of Canada auction of C$3 billion 10-year bonds yields
avg 1.504 pct

    By Solarina Ho
    TORONTO, June 21 (Reuters) - The Canadian dollar softened on
Wednesday to its weakest close in 1-1/2 weeks against the U.S.
dollar as depressed oil prices offset the Bank of Canada's shift
to a more hawkish stance.
    The Bank of Canada's top two officials said last week that
rate cuts put in place in 2015 had largely done their work, and
the bank would assess whether rates need to be kept at
near-record lows.             
    But with the price of oil, a main Canadian export, hitting a
10-month low, having dropped some 20 percent since peaking in
late February, some currency strategists said it was wiping out
expectations the central bank could raise rates sooner rather
than later.
    "It's really changed the tone that we saw over the last
couple of weeks where we saw the loonie rising on the basis of
strong economic fundamentals," said Rahim Madhavji, president at, who is expecting the Canadian dollar to
struggle over the next couple of quarters.
    "I think the rosiness of the loonie is gone ... It's back to
grinding lower."
    At 4:00 p.m. EDT (2000 GMT), the Canadian dollar         
was trading at C$1.3318 to the greenback, or 75.09 U.S. cents,
down 0.4 percent.
    The currency's strongest level of the session was C$1.3263,
while it touched its weakest in 1-1/2 weeks at C$1.3348.
    U.S. crude        prices were down 2.3 percent to $42.51 a
barrel as growing U.S. production and reduced Chinese refinery
activity fed mounting concern over excess global supply.      
    Canadian government bond prices were mostly higher across
the yield curve, with the two-year            up half a Canadian
cent to yield 0.908 percent and the 10-year             rising
10 Canadian cents to yield 1.489 percent.
    The Bank of Canada's auction of C$3 billion 10-year bonds on
behalf of the federal government yielded an average 1.504
    Canadian retail sales data for April is due out on Thursday,
while inflation data for May is due on Friday         .

 (Additional reporting by Fergal Smith, editing by G Crosse and
Grant McCool)