CANADA FX DEBT-C$ weakens on retail sales as Bank of Canada report awaited

* Canadian dollar at C$1.1280 or 88.65 U.S. cents
    * Bond prices fall across the maturity curve

    By Solarina Ho
    TORONTO, Oct 22 (Reuters) - The Canadian dollar was weaker
against the greenback on Wednesday, touching a session low after
data showed Canadian retail sales fell unexpectedly in August,
as the market awaited the Bank of Canada's quarterly policy
report, due later in the morning.
    Retail sales, dragged on by lower gasoline prices and weaker
sales of new cars and food, fell 0.3 percent, the biggest drop
since a 1.1 percent decline last December.
    "Weaker-than-expected (retail sales) and weaker Canadian
dollar, pretty straightforward. Realistically, it's not that bad
of a (retail) number," said Benjamin Reitzes, senior economist
and foreign exchange strategist at BMO Capital Markets.
    "It's certainly weaker than consensus, but ... overall it's
nothing to be too concerned about. It won't change anything for
the bank, that's for sure."
    At 9:23 a.m. (1426 GMT), the Canadian dollar was at
C$1.1280 to the greenback, or 88.65 U.S. cents, weaker than
Tuesday's close of C$1.1228, or 89.06 U.S. cents.
    U.S. consumer prices ticked higher in September, which
pushed the U.S. dollar modestly higher, though Reitzes said the
bulk of the Canadian dollar move was likely driven by the
Canadian data.
    Investors are expecting the Bank of Canada, widely forecast
to hold its key interest rate at 1 percent, to maintain a
cautious tone and focus on global economic uncertainties in its
    "I would expect (the report is) pretty much priced in,
unless it's exceptionally dovish and maybe they hint at a rate
cut, which would be very unlikely, or move away from the neutral
stance, which again, is very unlikely," Reitzes said.   
    Canadian government bond prices were lower across the
maturity curve, with the two-year down half a
Canadian cent to yield 0.98 percent and the benchmark 10-year
 falling 8 Canadian cents to yield 1.975 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)