CANADA FX DEBT-C$ stumbles to five week low as greenback rallies

(Adds analyst commentary on Fed and data, closing figures)
    * Canadian dollar at C$1.2301, or 81.29 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, May 22 (Reuters) - The Canadian dollar sagged on
Friday to its weakest in more than a month against a rallying
U.S. dollar following North American economic data that
buttressed expectations that the U.S. Federal Reserve will hike
interest rates sometime this year.
    Mixed Canadian data did not move the needle for investors
trying to gauge the Bank of Canada's next move. Retail sales
rose for a second straight month in March, climbing 0.7 percent
and topping expectations for a modest gain of 0.3 percent.
Volumes only increased 0.1 percent, however. 
    Meanwhile, inflation fell short of economists' forecasts and
the Bank of Canada's 1 to 3 percent target range, cooling to 0.8
percent in April, its smallest increase since October 2013. The
data reflected the central bank's expectations that soft energy
prices would put a temporary damper on the economy.
    The U.S. dollar rallied after data showed consumer prices
moderated in April due to weak gasoline prices, but rising
shelter and medical care costs gave underlying inflation
pressures a boost. 
    Remarks by Fed Chair Janet Yellen that a rate increase was
on track this year added further support. 
    "The Bank of Canada is almost a non-player, everything is
going to be driven by data and the Fed," said Rahim Madhavji,
President at
    "Inflation is another checkmark on the checklist for the Fed
to raise rates sooner rather than later and that's why the
(U.S.) dollar is up." 
    The Canadian dollar ended at C$1.2301 to the
greenback, or 81.29 U.S. cents, sharply weaker than the Bank of
Canada's official close of C$1.2208, or 81.91 U.S. cents on
    The loonie traded as weak as C$1.2322, its weakest since
April 16, after trading as strong as C$1.2197 early in the
    A fall in crude prices also added to pressure on the loonie.
    U.S. crude was down 1.3 percent to $59.92, while
Brent crude lost 1.5 percent to $65.53. 
    Canadian government bond prices were mixed across the
maturity curve, with the longer term bonds falling. The two-year
 bond was down 2.5 Canadian cents to yield 0.680
percent, while the benchmark 10-year fell 21
Canadian cents to yield 1.771 percent.
    The Canada-U.S. two-year bond spread was 6.2 basis points,
while the 10-year spread was -44.4 basis points.  

 (Additional reporting by Alastair Sharp; Editing by Bernadette
Baum and Grant McCool)