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

* Canadian dollar ends at C$1.4150, or 70.67 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Alastair Sharp
    TORONTO, Jan 22 (Reuters) - The Canadian dollar rallied
against its U.S. counterpart on 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. 
    Global equity and commodity markets had been hit hard so far
in 2016 on heightened fears about slower global growth, but have
recovered on rising expectations of monetary easing by central
banks in Europe and Japan. 
    "The market is beginning to get a better handle on the
risk," said Adam Button, currency analyst at ForexLive in
Montreal. "The first three weeks of the year, everyone was
panicking about everything."
    "It got a little bit overdone and the snapback rally has
been tremendous."
    The Canadian dollar ending the session trading at
C$1.4150 to the greenback, or 70.67 U.S. cents, much 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.
    It touched C$1.4689, or 68.08 U.S. cents at one point on
Wednesday, its weakest since 2003. 
    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 Derek Holt, an economist at
    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 mostly lower across the
maturity curve, although the two-year price was up
half a Canadian cent to yield 0.454 percent. The benchmark
10-year fell 45 Canadian cents to yield 1.318
    The Canada-U.S. two-year bond spread was 4.4 basis points
more negative at -41.9 basis points as Treasuries underperformed
at the front of the curve.

 (Additional reporting by Fergal Smith; Editing by Bernadette