CANADA FX DEBT-Canadian dollar extends weekly gain as retail sales data spurs short-covering

By Fergal Smith

TORONTO, Sept 19 (Reuters) - The Canadian dollar clawed back some earlier declines against its U.S. counterpart on Friday, as preliminary domestic data for August retail sales supported the view that the economy could avoid a second straight quarterly decline.

The loonie CAD= was trading 0.1% higher at 1.3775 per U.S. dollar, or 72.60 U.S. cents, after moving in a range of 1.3769 to 1.3825. For the week, the currency was up 0.5%.

Canadian retail sales fell 0.8% in July, matching expectations, but an advance reading for August showed sales rebounding by 1%.

"We're seeing some CAD buying coming in today on, I think, mainly the better Canadian data," said Erik Bregar, director, FX and precious metals risk management at Silver Gold Bull.

"If you were short CAD coming into today off the Fed meeting, then maybe you covered your shorts."

On Wednesday, the Federal Reserve signaled little urgency to lower borrowing costs quickly as it cut interest rates for the first time this year. The Bank of Canada also eased on Wednesday and said it would be ready to cut again if risks to the economy increased in the coming months.

"Despite ongoing trade uncertainty and further weakening in the labour market, the economy looks to be on track for a modest recovery to start the third quarter," Shelly Kaushik, a senior economist at BMO Capital Markets, said in a note.

The U.S. dollar .DXY extended its rebound since Wednesday against a basket of major currencies, while the price of oil CLc1 settled 1.4% lower at $62.68 a barrel on worries about large supplies. Oil is one of Canada's major exports.

Canadian bond yields moved higher across the curve. The 10-year CA10YT=RR was up 2.2 basis points at 3.208%, after hitting a four-month low on Wednesday at 3.127%.