CANADA FX DEBT-C$ weakens as Bank of Canada counsels caution, oil retreats

(Adds analyst quotes, details on Bank of Canada, updates
    * Canadian dollar at C$1.2804, or 78.10 U.S. cents
    * Loonie touched its strongest since July 15 at C$1.2744
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, April 13 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as oil prices
retreated and after the Bank of Canada counseled caution on the
country's growth outlook.
    The central bank kept interest rates steady, saying weaker
global growth, a less favorable U.S. outlook and shrinking
business investment would have driven the economic outlook lower
if not for the boost from the government's fiscal stimulus.
    "They accentuated almost every negative they could," said
Doug Porter, chief economist at BMO Capital Markets.
    The loonie has rebounded 15 percent after hitting a 12-year
low in January, triggering concern among some analysts that its
recovery will choke off exports.
    That risk was not lost on Bank of Canada Governor Stephen
Poloz. At a press conference following the interest rate
announcement, he said the stronger currency can put at risk
rotation of the economy towards non-resource growth.
    Still, the implied probability of a Bank of Canada rate cut
this year has dropped to less than 10 percent from more than 50
percent at the start of March. 
    U.S. crude prices were down 0.50 percent at $41.96 a
barrel as comments from Russia's energy minister added to doubts
that a producer meeting set for Sunday would yield a positive
    The "risk-reward" profile does not favor buying Canadian
dollars ahead of Sunday's meeting, said Dean Popplewell, chief
currency strategist at OANDA. Orders to buy U.S. dollars start
to step up around the C$1.2500 psychological threshold, he
    At 1:54 p.m. EDT (1754 GMT), the Canadian dollar 
was trading at C$1.2804 to the greenback, or 78.10 U.S. cents,
weaker than Tuesday's close of C$1.2759, or 78.38 U.S. cents.
    The currency's weakest level was C$1.2827, while it touched
its strongest since July 15 last year at C$1.2744.
    Risk appetite rose after surprisingly upbeat Chinese trade
data offered hope Asia's biggest economy is finally stabilizing.
    However, lower U.S. retail sales in March added to evidence
that economic growth stumbled in the first quarter. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3 Canadian
cents to yield 0.568 percent and the benchmark 10-year
 rising 44 Canadian cents to yield 1.244 percent.
    The Canada-U.S. two-year bond spread was 2.9 basis points
more negative at -18.9 basis points, while the 10-year spread
was 3.4 basis points more negative at -52.2 basis points as
Canadian government bonds outperformed.

 (Reporting by Fergal Smith; Editing by Chizu Nomiyama and James