* C$ down at 96.90 U.S. cents
* Markets eye Canada retail sales data, U.S. Fed
* Bonds flat across the curve
By Jennifer Kwan
TORONTO, June 23 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday, tugged lower by weak oil prices and recent U.S. economic data that raised worries about the pace of recovery.
"If you look at the U.S. data as of late it looks to be mixed, if not weaker than the market would like. That seems to be the driving factor, that maybe economic growth is stalling," said Jon Gencher, director of foreign exchange sales at BMO Capital Markets.
"That certainly has the market trading on a very cautious note," said Gencher. He noted data on Tuesday that showed a drop in existing home sales follows a string of weaker than expected U.S. economic data.
At 7:44 a.m. (1144 GMT), the Canadian dollar was at C$1.0320 to the U.S. dollar, or 96.90 U.S. cents, slightly lower than Tuesday's finish at C$1.0291 to the U.S. dollar, or 97.17 U.S. cents.
The currency was expected to track moves in equity markets on Wednesday, and an announcement by the Federal Reserve later in the day. The U.S. central bank is expected to restate its intention to keep interest rates on hold near zero percent for "an extended period" and perhaps offer a less upbeat outlook for the economy. [ID:nN22150078]
In Canada, the market will digest Canadian retail sales for April. [ECONCA]
Also weighing on the currency was weaker oil, which fell below $78 a barrel after U.S. industry data showed a surprise jump in crude and gasoline stocks, and investors looked to government figures later in the day for confirmation. [O/R]
The currency's move lower on Wednesday comes after the Bank of Canada said the day before the currency's drag on the Canadian recovery could be a key issue in future monetary policy.
Bank of Canada Deputy Governor Timothy Lane said the value of the Canadian currency against the U.S. dollar would affect the central bank's decision on interest rates on July 20 and beyond. [ID:nTOR007606] [ID:nN22144820]
Lane's comments, coupled with earlier inflation data, raised some doubt over what the central bank might do at the July 20 rate announcement. [ID:nN22110502]
Canadian government bond prices were largely flat across the curve. The two-year government bond CA2YT=RR slipped 2 Canadian cents to yield 1.703 percent, while the 10-year bond CA10YT=RR sagged 18 Canadian cents to yield 3.280 percent. (Reporting by Jennifer Kwan; Editing by Padraic Cassidy)