CANADA FX DEBT-C$ marginally softer after swings on retail sales, BoC

(Updates with new comments, closing number, details)

TORONTO, Oct 22 (Reuters) - The Canadian dollar finished the session slightly weaker against its U.S. counterpart on Wednesday, as investors digested unexpectedly weak August retail sales and the Bank of Canada’s statement.

The currency had touched the session’s weakest level after retail sales, weighed down by lower gasoline prices and weaker sales of new cars and food, unexpectedly fell 0.3 percent.

It quickly pared losses to strengthen to a session high after the Bank of Canada dropped its reference to neutrality in its rate statement on Wednesday.

“It’s definitely a dramatic day for Canadian dollar traders,” said Adam Button, currency analyst at ForexLive in Montreal.

“The market was clearly influenced by the removal of the reference to neutral in the (Bank of Canada’s) statement. But that was well telegraphed ... Part of the strength was that retail sales numbers weren’t as bad as initial knee-jerk reaction.”

The Canadian dollar finished the session at C$1.1243, or 88.94 U.S. cents, slightly weaker than Tuesday’s close of C$1.1228, or 89.06 U.S. cents.

Button anticipated more Canadian dollar weakness going forward.

The Bank of Canada, which also kept its key overnight rate at 1 percent, as expected, said the Canadian economy has “considerable excess capacity” and continued monetary stimulus was needed to close the gap.

Investors were looking for additional details on the bank’s overall outlook and analysis, but a scheduled press conference was canceled after a gunman fatally shot a soldier at the Canadian War Memorial in Ottawa and gunfire erupted shortly after inside the nearby parliament, near a room where Prime Minister Stephen Harper was speaking.

The gunman that attacked parliament was shot dead and Harper safely removed. Government buildings and much of the city’s downtown were locked down.

The shootings, which made some equity investors jittery, did not have an impact on the currency, where trading was mostly steady.

Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 1.5 Canadian cents to yield 0.985 percent and the benchmark 10-year falling 5 Canadian cents to yield 1.960 percent. (Editing by James Dalgleish)