* C$ falls to 95.19 U.S. cents
* Bond prices weaken
TORONTO, Feb 19 (Reuters) - Canada's dollar slumped against the U.S. currency on Friday, while government bond prices were mostly lower, in the wake of the U.S. Federal Reserve's surprise increase in its discount rate.
The Fed said late on Thursday the discount rate would be increased to 0.75 percent from 0.50 percent, effective Friday, although it left the benchmark federal funds rate, its main policy tool, unchanged near zero. [ID:nSGE61I036]
Market players interpreted the move as a sign that the U.S. central bank could move sooner than expected on increasing its benchmark fed funds rate even as the Fed moved to calm such speculation.
"The market is pricing in Fed hikes," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "The Canadian dollar has been swept up in the U.S. dollar buying in the post-Fed decision."
At 7:55 a.m. (1255 GMT), the Canadian dollar was at C$1.0505 to the U.S. dollar, or 95.19 U.S. cents, down sharply from the near one-month high at C$1.0414 to the U.S. dollar, or 96.02 U.S. cents, at Thursday's close.
It had weakened as low as C$1.0531 to the U.S. dollar, or 94.96 U.S. cents earlier.
Canadian government debt was mostly lower across the curve on Friday after the surprise Fed move.
The two-year Canadian government bondwas off 3 Canadian cents at C$100.22 to yield 1.391 percent, while the 10-year bond fell 1 Canadian cent to C$102.02 to yield 3.493 percent.
Later in the session, market players will take in Canadian data for December retail sales and the January leading indicator, as well as U.S. January consumer prices. (Editing by Theodore d'Afflisio)
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