CANADA FX DEBT-C$ notches 3-week high on robust retail sales

    * Canadian dollar at C$1.3270, or 75.36 U.S. cents
    * Loonie touches its strongest since Feb. 28 at C$1.3270
    * Bond prices lower across the yield curve

    By Fergal Smith
    TORONTO, March 21 (Reuters) - The Canadian dollar
strengthened on Tuesday to a three-week high against its U.S.
counterpart, boosted by higher oil prices and
stronger-than-expected domestic retail sales.
    Canadian retail sales rebounded in January with the largest
gain in nearly seven years, Statistics Canada said. The 2.2
percent increase topped economists' expectations for a gain of
1.1 percent, while volumes were also robust, up 1.3 percent.
    The rise in retail sales confirms the strength of the
economy following the recent run of firm domestic data, said
Robert Kavcic, senior economist at BMO Capital Markets.
    BMO had already raised their forecast for Canada's
first-quarter growth to 2.7 percent after robust wholesale trade
data on Monday.
    Prices of oil, one of Canada's major exports, rose on
expectations that an Organization of the Petroleum Exporting
Countries-led output cut would be extended beyond June.
    U.S. crude        prices were up 0.19 percent to $48.31 a
    The U.S. dollar        sunk to a six-week low against a
basket of major currencies after centrist Emmanuel Macron's
performance in a television debate raised expectations he would
win France's presidential election over the far-right's Marine
Le Pen, boosting the euro.             
    At 9:26 a.m. ET (1326 GMT), the Canadian dollar          was
trading at C$1.3270 to the greenback, or 75.36 U.S. cents,
stronger than Monday's close of C$1.3354, or 74.88 U.S. cents.
    The currency's weakest level of the session was C$1.3365,
while it touched its strongest since Feb. 28 at C$1.3270.
    Recent signs of long-awaited strengthening of domestic
economic growth probably came too late to help Finance Minister
Bill Morneau trim yawning annual deficits when the federal
budget is released on Wednesday.             
    Ontario Finance Minister Charles Sousa requested in a recent
letter to the federal finance minister that the government take
steps to reduce speculative investment in the housing market. He
suggested raising the capital gains inclusion rate of 50 percent
on the sale of residential housing that does not qualify for the
principal residence exemption.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 5 Canadian cents to
yield 0.82 percent and the 10-year             falling 31.5
Canadian cents to yield 1.765 percent.
    Canada's inflation report for February is due on Friday.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)