CANADA FX DEBT-C$ weakens as Fed uncertainty offsets retail sales

* C$ at C$1.0289 against U.S. dollar
    * Canadian retail sales rose 0.6 percent in July
    * Bond prices mostly higher across the curve

    By Leah Schnurr
    TORONTO, Sept 24 (Reuters) - The Canadian dollar was weaker
against its U.S. counterpart on Tuesday, erasing brief gains
following domestic retail sales data as market uncertainty
weighed over the direction of Federal Reserve economic stimulus
    The loonie hit a session high after data showed Canadian
retail sales rose 0.6 percent in line with economists'
expectations in July, but the currency quickly cut gains. The
improvement in sales reversed a drop the month before.
    After last week's market-surprising decision from the
Federal Reserve to hold the pace of its bond-buying program
steady, investors have sought insight from comments from several
Fed policymakers over the last few days.
    Influential New York Fed President William Dudley was the
latest on Tuesday morning, saying he wouldn't rule out a
reduction in bond-buying from the central bank later this year.
    The Fed is currently buying $85 billion in bonds a month to
keep borrowing costs low and prop up the economic recovery. The
Canadian dollar touched a three-month high in the wake of the
Fed's decision to stand pat, but has since pulled back from
    "We had a pretty sharp adjustment post-Fed," said Mark
Chandler, head of Canadian fixed income and currency strategy at
Royal Bank of Canada.
    "I think people will get comfortable with the idea that they
linked this to a change in their forecasts. I don't think
expectations will be built up as much for the October meeting
for the Fed."
    A busy schedule of Fed speakers throughout the week is
likely to hold the market's attention.
    The Canadian dollar was at C$1.0289 to the U.S.
dollar, or 97.19 U.S. cents, weaker than Monday's session close
of C$1.0285, or 97.23 U.S. cents. 
    Prices for Canadian government bonds were mostly higher
across the maturity curve, though the two-year bond 
was unchanged to yield 1.211 percent. The benchmark 10-year bond
 rose 23 Canadian cents to yield 2.621 percent.