* Canadian dollar at C$1.2717, or 78.63 U.S. cents
* Loonie touches its weakest since April 9 at C$1.2718
* Canada's inflation rate edges up to 2.3 pct in March
* Bond prices mixed across steeper yield curve
By Fergal Smith
TORONTO, April 20 (Reuters) - The Canadian dollar weakened to an 11-day low against its U.S. counterpart on Friday after data showed domestic inflation rose less than expected, with the currency extending its decline since the Bank of Canada held interest rates steady two days ago.
Canada's annual inflation rate in March edged up to 2.3 percent from 2.2 percent in February, the highest level in more than three years, Statistics Canada said. it was less than the 2.4 percent forecast by analysts, while the Bank of Canada's three measures of core inflation were little changed.
"The markets are a little bit disappointed because the numbers are softer than anticipated." said Derek Holt, head of capital economics at Scotiabank. "But to me, it still keeps May in play for the Bank of Canada."
The central bank left its benchmark interest rate on hold at 1.25 percent on Wednesday and said it did not know when or how aggressive it would need to be to keep inflation in check. of an interest rate hike in May were little changed at 35 percent after the data, the overnight index swaps market showed. BOCWATCH
In separate data, Canadian retail sales grew by 0.4 percent in February as higher sales at auto dealerships and general merchandise stores outweighed widespread weakness in other sectors, Statistics Canada said. Analysts had expected a 0.3 percent gain.
At 9:24 a.m. EDT (1324 GMT), the Canadian dollar CAD=D4 was trading 0.4 percent lower at C$1.2717 to the greenback, or 78.63 U.S. cents. The currency touched its weakest level since April 9 at C$1.2718.
The price of oil, one of Canada's major exports, fell on Friday after U.S. President Donald Trump criticized the Organization of the Petroleum Exporting Countries and said oil prices were artificially high. crude CLc1 prices were down 0.4 percent at $68.03 a barrel.
Canadian government bond prices were mixed across a steeper yield curve, with the two-year CA2YT=RR up 3.4 Canadian cents to yield 1.921 percent and the 10-year CA10YT=RR falling 5 Canadian cents to yield 2.327 percent.
The gap between Canada's 2-year yield and its U.S. counterpart widened by 2.2 basis points to a spread of -52.0 basis points.