CANADA FX DEBT-C$ retreats from 11-day high as factory sales dip

    * Canadian dollar at C$1.2539, or 79.75 U.S. cents
    * Loonie touches its strongest since Feb. 5 at C$1.2451
    * Bond prices higher across a flatter yield curve
    * Canada-U.S. 2-year spread touches widest since Nov. 30

    TORONTO, Feb 16 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, pulling back from an
earlier 11-day high as the greenback broadly climbed and after
domestic data showed a drop in manufacturing sales.
    At 9:10 a.m. EST (1410 GMT), the Canadian dollar         
was trading 0.5 percent lower at C$1.2539 to the greenback, or
79.75 U.S. cents.
    The currency's weakest level of the session was C$1.2540,
while it touched its strongest since Feb. 5 at C$1.2451.
    For the week, the commodity-linked loonie was headed for a
0.3 percent gain. It fell 1.2 percent last week, when global
stocks had slumped.
    Canadian factory sales slipped 0.3 percent in December after
recording a huge jump in November, pulled down by weakness in
petroleum and coal products as well as food manufacturing,
Statistics Canada said.             
    In separate data, foreign investment in Canadian securities
slipped slightly in December after five strong months but
international demand over the year was high enough to set an
annual record.              
    The U.S. dollar        rose against a basket of major
currencies, rebounding from an earlier three-year low.
    Gains for the greenback weighed on the price of oil, one of
Canada's major exports. U.S. crude        prices were down 0.2
percent at $61.19 a barrel.             
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            price up 2 Canadian
cents to yield 1.839 percent and the 10-year             rising
30 Canadian cents to yield 2.338 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 1.4 basis points to a spread of -34.9
basis points, its widest since Nov. 30.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)