* C$ at C$0.9974 vs US$, or $1.0026 * Canada retail sales weaker than forecast * China HSBC PMI indicates pace of growth increase * U.S. markets closed for Thanksgiving By Solarina Ho TORONTO, Nov 22 The Canadian dollar softened against the U.S. currency on Thursday after domestic retail sales data came in weaker than forecast, but overall trading was quiet due to the U.S. Thanksgiving holiday. Canadian retail sales edged up by a less-than-expected 0.1 percent in September from August, after July's 0.3 percent boost, Statistics Canada said on Thursday. "Another disappointment clearly ... It really reflects a Canadian household that's pulling back, slowing their rate of borrowing, and in many cases looking for good deals across border, taking advantage of the high Canadian dollar," said Sal Guatieri, senior economist at BMO Capital Markets. "The (Canadian dollar) weakness is consistent with the softer than expected retail sales report." At 9:00 a.m. (1400 GMT), the Canadian dollar was trading at C$0.9974 to the U.S. dollar, or $1.0026. This was slightly higher than Wednesday's North American close at C$0.9965, or $1.0035. Tempering the softer sentiment was HSBC's preliminary Chinese manufacturing survey which showed expansion of the country's vast manufacturing sector was accelerating in November for the first time in 13 months, a sign that the pace of economic growth has revived after seven consecutive quarters of slowdown. "That's kind of a put a small risk-on tone to the market. Even though the U.S. is not around," said David Bradley, director of foreign exchange trading at Scotiabank, who added Canada's dollar was likely to remain in a narrow trading range. The Canadian dollar was weaker against all major currencies except for the Japanese yen, which weakened to a 7-1/2 month low against the Canadian currency. The yen was pressured by growing speculation that the Bank of Japan would aggressively ease monetary policy in coming months. Prices for Canadian government debt were weaker across the curve, with the two-year bond off 1 Canadian cent to yield 1.121 percent and the benchmark 10-year bond slipping 14 Canadian cents to yield 1.778 percent.