* C$ down at 96.44 U.S. cents
* Bonds mixed, await U.S. Federal Reserve decision
* Canada retail sales fall more than expected 2.0 pct (Updates with reaction from retail sales data)
TORONTO, June 23 (Reuters) - The Canadian dollar extended losses to approach a two-week low against the U.S. currency on Wednesday after a much sharper-than-expected 2.0 percent drop in domestic retail sales in April.
Weak autos helped depress Canada's April retail sales, putting the month well behind the median forecast for a 0.4 percent drop in retail sales, according to government data released on Wednesday [ID:nN23196800].
"This was quite a disappointing report. The broad-based nature of it suggests that during the month Canadians more or less sat on their hands," said Millan Mulraine, economics strategist at TD Securities.
He said the report was unlikely to prevent the Bank of Canada from raising rates next month.
At 8:55 a.m. (1255 GMT), the Canadian dollar was at C$1.0369 to the U.S. dollar, or 96.44 U.S. cents, down from C$1.0291 to the U.S. dollar, or 97.17 U.S. cents, at Tuesday's close.
Additionally, the currency was tugged lower by weak oil prices, which fell towards $77 a barrel, and overhanging 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.
Market players also await an announcement by the U.S. 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]
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 mixed, with short term bonds advancing after the weaker-than-expected retail sales report. Long-dated issues were weaker.
The two-year government bondwas up 6 Canadian cents to yield 1.664 percent, while the 10-year bond dipped 8 Canadian cents to yield 3.268 percent. (Reporting by Ka Yan Ng and Jennifer Kwan)
(Reporting by Ka Yan Ng; editing by W Simon )
Our Standards: The Thomson Reuters Trust Principles.