CANADA FX DEBT-Canadian dollar notches biggest gain in a month as stocks rally

    (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar strengthens 0.9% against the greenback
    * Touches strongest level since last Thursday at 1.2628
    * Canadian retail sales dip 0.6% in July
    * Canadian 10-year yield touches a 2-month high at 1.335%

    By Fergal Smith
    TORONTO, Sept 23 (Reuters) - The Canadian dollar
strengthened to a one-week high against its U.S. counterpart on
Thursday as investor sentiment picked up and domestic data
showed that retail sales fell less than expected in July.
    World stock markets          rallied and the safe-haven U.S.
dollar retreated from one-month highs as worries about contagion
from property developer China Evergrande eased and investors
digested the Federal Reserve's plans for reining in stimulus.

    Canada is a major exporter of commodities, including oil, so
the loonie tends to be particularly sensitive to investor
appetite for risk.
    "The assumption here is that (Fed interest) rate hikes are
still a long ways out and so equities markets can still perform
with accommodative financial conditions," said Mazen Issa,
senior FX strategist at TD Securities in New York.
    "Consequently, currencies that have a higher beta to the
equity market, like the CAD, can do alright."
    U.S. crude oil futures        settled 1.5% higher at $73.30
a barrel, while the Canadian dollar        was trading up 0.9%
at 1.2653 to the greenback, or 79.03 U.S. cents.
    It was the currency's biggest advance since Aug. 23. It
touched its strongest level since last Thursday at 1.2628.
    Canadian retail sales dipped 0.6% in July, compared with
expectations for a decline of 1.2%, while a preliminary estimate
showed sales rebounding 2.1% in August.
    Canadian government bond yields were higher across a steeper
curve, tracking the move in U.S. Treasuries.
    The 10-year             touched its highest level since July
14 at 1.335% before dipping to 1.330%, up 11.6 basis points on
the day.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)

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