CANADA FX DEBT-C$ shrugs off weak data, rebounds on U.S. dollar selloff

(Adds details, comment, closing figures)
    * Canadian dollar at C$1.2579 or 79.50 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, March 20 (Reuters) - The Canadian dollar rallied on
Friday as a U.S. dollar selloff against major currencies and
higher crude prices overcame the impact of weaker-than-forecast
domestic retail sales, which had initially dragged on the
    The greenback has struggled since a U.S. Federal Reserve
statement on Wednesday that signaled a slower approach to
raising interest rates than some investors had expected.
    "It continues to be a U.S. dollar story, except for the oil
component," said Rahim Madhavji, president of
    "There's definitely been a knee-jerk reaction in the
Canadian dollar ... Going forward, the (U.S. and Canadian)
central banks still hold all the cards in terms determining
where the Canadian dollar will go."
    Madjavji said the U.S. dollar's broad swings since Wednesday
reflect polarizing reactions to the Fed's statement, with some
market participants arguing there will be lower rates for longer
and others still betting on a June hike.
    The Canadian dollar finished the session at
C$1.2579 against the U.S. dollar, or 79.50 U.S. cents, roughly a
cent and a half stronger than Thursday's Bank of Canada close of
C$1.2726, or 78.58 U.S. cents. The loonie surged some 2 percent
on Wednesday and then lost half of that gain the next day.
    The currency gained about 1.6 percent for the week.
    Earlier in the session, data showed that January retail
sales fell for a second month, down 1.7 percent to C$41.46
billion, as gasoline sales posted the biggest monthly drop since
November 2008 and consumers spent less on new cars. Sales fell
in seven of 11 retail subsectors, representing 83 percent of
retail trade. 
    "The retail sales miss ... isn't surprising considering that
the Bank of Canada had provided guidance that Q1 data was going
to be weak," said Brad Schruder, director of foreign exchange at
BMO Capital Markets.
    Inflation data for February was unchanged from January,
holding at 1 percent as cheap gasoline prices continued to weigh
down the consumer price index.
    Shortly after the data, the loonie briefly touched C$1.2724,
or 78.59 U.S. cents, the weakest level of the session.
    Canadian government bond prices were higher across the
maturity curve, with the two-year adding 3 Canadian
cents to yield 0.459 percent and the benchmark 10-year
 rising 10 Canadian cents to yield 1.304 percent.

 (Additional reporting by Allison Martell; Editing by Bernadette