CANADA FX DEBT-C$ makes small gains after retail sales

* C$ off high after rising on stronger than expected data

* Recovering car sales boost Canada January retail sales

* Bonds fall as Toronto stocks extend gains into ninth day

TORONTO, March 20 (Reuters) - The Canadian dollar was moderately firmer against the U.S. currency on Friday, but off session highs, after figures showed January retail sales rose almost twice as much as expected.

An unexpected rise in new car purchases helped spur Canadian retail sales to their first increase since September, a greater-than-expected 1.9 percent, according to Statistics Canada data released on Friday. That compared to market expectations for a rise of 1 percent. [ID:nN19306411]

The data initially helped push the Canadian dollar towards its overnight session high at C$1.2292 to the U.S. dollar, or 81.35 U.S. cents, but stopped short.

At 9:55 a.m. (1455 GMT), the currency was at C$1.2356 to the U.S. dollar, or 80.93 U.S. cents, up from C$1.2377 to the U.S. dollar, or 80.80 U.S. cents, at Thursday’s close.

Analysts said the rare piece of positive economic data was somewhat skewed because the figure followed a 5.2 percent decline in retail sales in December, the largest drop in more than 15 years. It also reflected a month that saw very deep discounts in vehicle prices.

Paul Ferley, assistant chief economist at Royal Bank of Canada, said that despite the small recovery in retail sales, the overall economic landscape still points to a weak January GDP.

He said the longer-term trend for the Canadian dollar is tied to the fortunes of the U.S. dollar, which is still reeling from the fallout from recent U.S. Federal Reserve actions.

Earlier this week, the Fed announced that it would inject an additional $1 trillion into the U.S. economy, partly by buying government bonds. [ID:nN18343369]

The Fed’s move increased the chances that the Bank of Canada will follow suit with its own program of pumping money directly into the economy. [ID:nN19442410]


Most Canadian bond prices slipped on Friday with equity markets looking to squeeze in a ninth session of gains.

Toronto’s main stock index was moderately higher shortly after the market open. Bond prices typically trade inversely to stocks.

Some uncertainty about the U.S. bond purchase plan influenced mild losses, following a gigantic rally in bond prices earlier this week immediately after the Fed’s surprise announcement of its new action plan.

The two-year bond was unchanged at C$102.93 to yield 0.997 percent. The 10-year bond fell 18 Canadian cents to C$109.12 to yield 2.718 percent.

The 30-year bond lost 25 Canadian cents to C$125.25 to yield 3.572 percent. The U.S. 30-year bond yielded 3.632 percent. (Reporting by Ka Yan Ng; Editing by Peter Galloway)