(Adds strategist quotes and details throughout; updates prices) * Loonie falls 0.2% against the greenback * Canadian retail sales rise by 1.1% in March * Price of U.S. oil decreases 2.7% * Canadian bond prices rise across a flatter yield curve By Fergal Smith TORONTO, May 22 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from an earlier four-week high as a drop in oil prices offset domestic data showing a jump in retail sales. At 4:36 p.m. EDT (2036 GMT), the Canadian dollar was trading 0.2% lower at 1.3430 to the greenback, or 74.46 U.S. cents. Earlier in the session, the loonie touched its strongest level since April 23 at 1.3358. External factors, such as risk aversion and lower oil prices, sparked the reversal lower for the Canadian dollar, said Shaun Osborne, chief currency strategist at Scotiabank. The price of oil, one of Canada's major exports, fell as an unexpected build in U.S. crude inventories compounded investor worries that a trade fight between Washington and Beijing could dent crude demand over the long haul. U.S. crude oil futures settled 2.7% lower at $61.42 a barrel. Meanwhile, Canadian retail sales grew by 1.1% in March from February, due largely to higher sales at gasoline stations, Statistics Canada said. Sales volumes were more subdued, rising 0.3%. The data "supports the idea that Q1 (first quarter) growth is still looking pretty decent, certainly relative to where the (central) bank expected the economy to be," Osborne said. The Bank of Canada, which will make an interest rate decision next week, has projected that the economy barely grew in the first quarter of the year. Chances of an interest rate cut this year have slumped to less than 20% from about 70% after the last rate decision in April, data from the overnight index swaps market indicated. Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 3.5 Canadian cents to yield 1.666% and the 10-year was up 39 Canadian cents to yield 1.720%. On Tuesday, the 10-year yield touched its highest intraday since May 3 at 1.764%. Prime Minister Justin Trudeau said Canada would spend an estimated C$15.7 billion to renew its coast guard fleet and that it would partner with a new shipyard to complete the project. (Reporting by Fergal Smith; editing by Jonathan Oatis)
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