CANADA FX DEBT-C$ firms modestly, helped by rise in retail sales

* Canadian dollar at C$1.0728 or 93.21 U.S. cents
    * Bond yields fall, 10-year at more than 1-year low

    By Leah Schnurr
    TORONTO, July 23 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Wednesday, lifted by retail
sales that rose more than forecast in May and as investors'
appetite for risk cautiously improved.
    The retail sales report, the only significant domestic
economic data on the calendar this week, showed sales rose 0.7
percent in May, beating expectations for a gain of 0.6 percent.
The data took the loonie briefly to a session high of C$1.0710.
    Markets also continued to watch the events unfolding in
Ukraine and the Middle East. Worries over rising tensions in the
two regions had sapped investor sentiment earlier in the week,
but the return of risk appetite appeared to persist Wednesday.
    "The strength that we've seen this morning from the loonie, 
before and after the (retail sales) numbers, looks like it could
be sustained," said Mazen Issa, senior Canada macro strategist
at TD Securities in Toronto.
    "Yesterday was a fairly positive day in terms of sentiment,
risk assets were up a bit, so I think you're seeing some of that
carry through into today as well."
    The Canadian dollar was at C$1.0728 to the
greenback, or 93.21 U.S. cents, stronger than Tuesday's close of
C$1.0736, or 93.14 U.S. cents.
    Still, investors were likely to tread cautiously. Israeli
forces continued to hit Gaza, while Ukraine said that
pro-Russian rebels shot down two Ukrainian fighter jets, not far
from where a Malaysian airliner was brought down last week.
    With the rest of the week likely to be quiet on the domestic
front for the loonie, the currency could find itself range-bound
in coming sessions. The Canadian dollar rallied 1.6 percent in
June but has given back about a half a percent this month so
    Canadian government bond yields were lower across the
maturity curve, sending the yield on the benchmark 10-year
 falling to a new more than one-year low at 2.121
    The two-year was up 1.3 Canadian cents to yield
1.071 percent.

 (Editing by Nick Zieminski)