CANADA FX DEBT-C$ strengthens as crude oil prices rally, retail sales jump

* Canadian dollar at C$1.4166 or 70.59 U.S. cents
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, Jan 22 (Reuters) - The Canadian dollar rallied
against its U.S. counterpart Friday, extending gains following
the Bank of Canada's steady rate decision mid-week, as crude oil
prices rose and retail sales data suggested the economy was
stronger than expected.
    Oil rose as a cold snap boosted demand for heating oil
across the United States and Europe. 
    A greater global appetite for risk was also supportive of
the currency, according to Derek Holt, vice president of
economics at Scotiabank.
    Rising expectations of monetary easing by central banks in
Europe and Japan have prompted a strong recovery in global oil
and stock markets. 
    The market has reduced expectations for Bank of Canada rate
cuts after the central bank decided on Wednesday to leave its
policy rate at 0.50 percent, putting the onus on federal
authorities to raise spending. 
    "The Bank of Canada has signaled they have a higher
threshold for acting soon and they have punted the ball to the
federal government," said Holt.
    At 9:37 a.m. EST (1437 GMT), the Canadian dollar 
was trading at C$1.4166 to the greenback, or 70.59 U.S. cents,
stronger than the Bank of Canada's official close of C$1.4279,
or 70.03 U.S. cents.
    The currency touched its strongest level since Jan. 11 at
C$1.4139, while its weakest level of the session was C$1.4300.  
    Canadian retail sales jumped 1.7 percent in November, far
more than expected, due to higher sales at new car dealers and
Black Friday purchases, data from Statistics Canada showed.
    On the other hand, Canada's annual inflation rate edged up
less than expected to 1.6 percent from 1.4 percent in November,
Statistics Canada said. The core inflation rate continued to
edge downward, falling to 1.9 percent from 2.0 percent the
previous month. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 2.5
Canadian cents to yield 0.469 percent and the benchmark 10-year
 falling 52 Canadian cents to yield 1.325 percent.
    The Canada-U.S. two-year bond spread was 2.5 basis points
more negative at -40.0 basis points as Treasuries underperformed
at the front of the curve.

 (Editing by Bernadette Baum)