CANADA FX DEBT-C$ pulls back from 10-day high on tepid retail sales gain

    * Canadian dollar at C$1.2720, or 78.62 U.S. cents
    * Loonie touches its strongest since Nov. 13 at $1.2673
    * Canadian retail sales rise 0.1 percent in September
    * Bond prices higher across the a steeper yield curve

    By Fergal Smith
    TORONTO, Nov 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, pulling back from an
earlier 10-day high, after domestic data showed retail sales
rose far less than expected in September. 
    The 0.1 percent increase was short of economists' forecasts
for a gain of 0.9 percent, while volumes fared worse, declining
by 0.6 percent.             
    The data is negative for the Canadian dollar and positive
for the front end of Canada's yield curve, "which still has some
work to do in pricing out a January hike," Nick Exarhos, an
economist at CIBC Capital Markets, wrote in a research note.
    The Bank of Canada raised interest rates in July and
September for the first time in seven years but has since turned
more cautious about the outlook for the domestic economy.
    Chances of another hike by the bank's January meeting dipped
to 31 percent from 34 percent before the data, the overnight
index swaps market indicated.           .
    Investors will be looking to a speech by Bank of Canada
Governor Stephen Poloz in December for clues on prospects for
more rate hikes.
    At 9:22 a.m. EST (1422 GMT), the Canadian dollar         
was trading at C$1.2720 to the greenback, or 78.62 U.S. cents,
down 0.2 percent.
    The currency's weakest level of the session was C$1.2730,
while it touched its strongest since Nov. 13 at $1.2673.
    The currency weakened despite higher prices for oil, one of
the countries main exports.             
    U.S. crude        prices were up 0.26 percent at $58.17 a
    Still, strong inflows of foreign money into Canadian stocks
and bonds this year are adding to investor confidence that the
rally since May in the country's currency is sustainable because
it is not just supported by speculative flows.                  
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year            up 3.5 Canadian cents
to yield 1.437 percent and the 10-year             rising 3
Canadian cents to yield 1.902 percent.
    U.S. markets were closed for the Thanksgiving holiday.

 (Reporting by Fergal Smith
Editing by Jonathan Oatis)