* C$ falls to $1.0036
* Bond prices mixed across the curve
By Claire Sibonney
TORONTO, Jan 14 (Reuters) - The Canadian dollar fell against the greenback for a second day on Friday, dropping almost a penny and inching back to parity after China's central bank raised lenders' required reserves to tame inflation.
China's move was the fourth in just over two months and fanned expectation that Beijing's appetite for buying commodities could lessen, which hit oil and material prices, as well as commodity-linked currencies such as the Canadian dollar. [ID:nTOE706030]
At 8:00 a.m. (1300 GMT), the Canadian dollar CAD=D4 stood at C$0.9964 to the U.S. dollar, or $1.0036, down from Thursday's close at C$0.9892 to the U.S. dollar, or $1.0109, when it finished lower for the first time in 13 sessions.
"The softening up of commodity prices is obviously not helping Canada today," said Steve Butler, director of foreign exchange trading at Scotia Capital. "This negative risk news, negative commodity news, caught the short-covering quickly."
Butler sees the immediate range for the currency now between C$0.9910 to C$1.0040.
Investors will be watching key U.S. inflation and retail sales data and a Thomson Reuters/University of Michigan's reading on consumer sentiment later in the morning.
Analysts are also awaiting the Bank of Canada's interest rate decision next week, with particular focus on the tone of central bank chief, Mark Carney, which may provide further direction for the currency.
A Reuters poll of 45 forecasters unanimously predict the Bank of Canada will keep interest rates unchanged when it announces its decision Jan. 18. More than half the respondents said the next rate hike would occur sometime in the first half of 2011. [ID:nN1340408]
Canadian government bond prices were mixed across the curve.
The two-year bond CA2YT=RR was down 4 Canadian cents to yield 1.797 percent, while the 10-year bond CA10YT=RR gained 2 Canadian cents to yield 3.250 percent. (Editing by Padraic Cassidy)
