CANADA FX DEBT-C$ reverses from a 2-week high as oil rally loses momentum

(Adds analyst quotes, details on U.S. oil inventories, Canadian
data, updates prices)
    * Canadian dollar at C$1.3749, or 72.73 U.S. cents
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, Feb 18 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, pulling back from a
two-week high earlier in the session as rising U.S. oil
inventories tempered a rally in crude oil prices and U.S. stocks
reversed to trade lower.
    The risk-sensitive commodity currency has firmed almost 2
percent since hitting C$1.4018 one week ago, but gains stalled
in front of C$1.3640, the near eight-week high touched earlier
this month.
    "The Canadian dollar is a slave to the oil market," said
Adam Button, a currency analyst at ForexLive in Montreal. "We're
finding out that the world is awash in oil."    
    This week's rally in oil was pared after a U.S. government
report showed a rise in crude stocks, countering optimism over a
deal by oil producers to freeze output. 
    U.S. crude prices settled at $30.77 a barrel, up 0.36
    Nonetheless, expectations for further easing by the Bank of
Canada have diminished as crude oil prices have rallied. The
implied probability of a rate cut by year-end has dropped to 85
percent, while as recently as Feb. 12, a 25 basis point cut had
been fully implied.
    The Canadian dollar ended at C$1.3749 to the
greenback, or 72.73 U.S. cents, weaker than Wednesday's official
close of C$1.3705, or 72.97 U.S. cents.
    The currency touched its strongest since Feb. 4 at C$1.3654,
     while its weakest level was C$1.3912.
    Canadian wholesale trade rose 2.0 percent in December from
November, more than expected. It follows solid
manufacturing data and strength in exports for the same month.
    However, the market is questioning whether firm December
data will extend into January, according to Button.    
    Canadian government bond prices were higher across the
maturity curve in sympathy with U.S. Treasuries as the recovery
in risk appetite ran out of steam.
    The two-year price rose 9 Canadian cents to yield
0.435 percent and the benchmark 10-year was up 61
Canadian cents to yield 1.113 percent.
    The 10-year yield has rebounded almost 200 basis points from
last week's record low of 0.921 percent.
    Top-tier domestic data is awaited on Friday, featuring
December retail sales and the January consumer price index.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and Chris