Market News

* Canadian dollar strengthens 0.8% against the greenback
    * Touches strongest since last Friday at 1.2650
    * Canadian retail sales dip 0.6% in July
    * Canadian bond yields rise across a steeper curve

    TORONTO, Sept 23 (Reuters) - The Canadian dollar on Thursday
strengthened by the most in one month against the greenback as
equity markets globally added to their previous day's gains and
domestic data showed that retail sales fell less than expected
in July.
    Canadian retail sales dipped 0.6% in July, beating
expectations for a decline of 1.2%, while a preliminary estimate
showed sales rebounding 2.1% in August.              
    World markets          rallied after the U.S. Federal
Reserve confirmed plans to start reeling in stimulus and shares
of troubled property developer China Evergrande leapt ahead of a
crucial debt payment. A fresh injection of cash by China into
its financial system helped to reassure investors.             
    The Canadian dollar        was trading 0.8% higher at 1.2665
to the greenback, or 78.96 U.S. cents, its biggest gain since
Aug. 23. The currency touched its strongest level since last
Friday at 1.2650.
    Gains for the loonie came as the U.S. dollar        lost
ground against a basket of major currencies, pulling back from
one-month highs.             
    The price of oil, one of Canada's major exports, was
supported by growing fuel demand and a draw in U.S. crude
inventories as production remained hampered in the Gulf of
Mexico after two hurricanes. U.S. crude        prices were up
0.1% at $72.28 a barrel.              
    Canadian government bond yields were higher across a steeper
curve, with the 10-year             up 7.2 basis points at
1.286%.
    The gap between the Canadian 10-year rate and its U.S.
equivalent narrowed by 3.8 basis points to 7.9 basis points in
favor of the U.S. bond, the smallest gap since Aug. 11.

 (Reporting by Fergal Smith, Editing by Nick Zieminski)