* Canadian dollar rises 0.1% against the greenback * Canadian retail sales rise 0.4% in August * Annual inflation rate rises to 0.5% in September * Canadian bond yields move higher across a steeper curve By Fergal Smith TORONTO, Oct 21 (Reuters) - The Canadian dollar rose to a six-week high against the greenback on Wednesday as investors weighed U.S. stimulus prospects, but it gave back some of its gain as domestic retail sales data suggested the pace of economic recovery would slow. The Canadian dollar was trading 0.1% higher at 1.3108 to the greenback, or 76.29 U.S. cents, which was the smallest advance among G10 currencies. Earlier, the currency touched its strongest level since Sept. 7 at 1.3081. Canadian retail sales rose by 0.4% in August from July, missing analyst forecasts for a 1.1% increase, data from Statistics Canada showed. A flash estimate showed no increase in September. "I think it (the data) shows that some combination of waning demand and supply side problems is leading to a pretty toppish looking retail sector," said Derek Holt, vice president of capital markets economics at Scotiabank. It supports the Bank of Canada's inclination "not to get too carried away by the immediate spurt of activity in the initial stages of recovery and that it is going to be a long and bumpy recovery ahead," Holt said. Separate data from Statistics Canada showed that Canada's annual inflation rate was 0.5% in September, up from 0.1% in August. The U.S. dollar lost ground against a basket of major currencies and shares on Wall Street rose as investors watched for signs that Washington could be close to agreeing on the next coronavirus aid package. Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures fell 1.7% to $40.99 a barrel after a surprise build-up in U.S. crude stockpiles. Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year rose 1.9 basis points to 0.625%, having touched its highest since Sept. 1 at 0.653%. (Reporting by Fergal Smith Editing by Alistair Bell)
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