* C$ falls as low as 93 U.S. cents, lowest since Feb. 9
* Bond prices climb in flight to safety
* Canada April inflation tops forecast at 1.8 pct (Adds details throughout)
By Ka Yan Ng
TORONTO, May 21 (Reuters) - Canada's dollar hit its weakest level in 14-weeks against the U.S. dollar on Friday as European worries more than offset Canadian inflation data that kept alive the possibility of a June 1 interest rate increase.
The currency slumped as low as C$1.0753 to the U.S. dollar, or 93.00 U.S. cents, its lowest since Feb. 9, as market players weighed the higher than-expected data, against persisting global worries.
It pared losses after Canadian retail sales in March soared 2.1 percent from February, the biggest increase since February 2005. [ID:nN21207192]
The pair of strong economic data, however, had little lasting influence on the Canadian dollar.
"That just illustrates how powerful the safe haven bid is in its ability to easily overwhelm the economic numbers," said Eric Lascelles, chief Canada macro strategist at TD Securities.
The consumer price index gained 0.3 percent in April for an annual inflation rate of 1.8 percent, Statistics Canada said.
Core CPI, which excludes volatile items like gasoline and closely monitored by the Bank of Canada, climbed 0.3 percent in the month for an annual rate of 1.9 percent compared with analysts' forecast of 1.8 percent rate. [ID:nN21149251] ECONCA
"It doesn't answer the question as to whether or not the Bank of Canada goes on June 1. I think that's what most traders are looking at: 'Is this number going to be a decisive enough reason to move on June 1?'" said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"And setting aside the other factors that are influencing the markets, being risk on, risk off, equities, uncertainties with respect to Europe, China, global growth concerns, they remain very, very much influential in what will likely be a decision that will come right down to June 1 for the Bank of Canada."
The data kept market expectations, as measured by yields on overnight index swaps, about evenly split on whether the Bank of Canada raises interest rates next month. BOCWATCH
Market volatility arising from the European debt crisis has dramatically eroded the market's sense of pending rate increases. They were a near certainty a month ago when the central bank removed its conditional commitment to leave rates unchanged at 0.25 percent until the end of June.
At 8:55 a.m. (1255 GMT), the Canadian dollar CAD=D4 had pared session losses, to sit at C$1.0696 to the U.S. dollar, or 93.49 U.S. cents, down from C$1.0678, or 93.65 U.S. cents, at Thursday's close.
Canadian bonds prices climbed in a flight to safety as European equity markets dropped and U.S. stock index futures pointed to a lower open as well.
European stocks fell despite German approval of a euro zone rescue package, while market players also look for developments from European finance ministers who were meeting later on Friday to discuss changes to budget rules to prevent another Greek-style debt crisis. [MKTS/GLOB]
The two-year government bond CA2YT=RR jumped 11 Canadian cents to C$99.89 yield 1.556 percent, while the 10-year bond CA10YT=RR gained 38 Canadian cents to C$101.95 to yield 3.271 percent.
Another factor that may influence markets on Friday is liquidity, which could dry up as the Canadian bond market closes at 1 p.m. (1700 GMT) ahead of a long weekend. Canadian financial markets are closed on Monday for Victoria Day.
(Additional reporting by Claire Sibonney) (Editing by Theodore d'Afflisio)