* Canadian dollar falls 0.2 percent against greenback
* Price of U.S. oil falls 7.7 percent
* Canadian bond prices rise across a flatter yield curve
* The loonie falls 0.6 percent for the week
By Fergal Smith
TORONTO, Nov 23 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, as a further slide in the price of oil offset domestic data showing above-target inflation and increased retail sales.
Canada's annual inflation rate remained above the central bank's target of 2 percent for the ninth straight month in October and retail trade volumes climbed 0.5 percent in September, data showed. morning's data were a little bit better overall than what was expected ... but they weren't enough, it was the weakness in oil that dominated," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
The price of oil, one of Canada's major exports, slumped to the lowest point in more than a year amid fears of a supply glut even as major producers consider cutting output. U.S. crude oil futures settled 7.7 percent lower at $50.42 a barrel. 3:22 p.m. the Canadian dollar CAD=D4 was trading 0.2 percent lower at 1.3224 to the greenback, or 75.62 U.S. cents.
The currency, which on Tuesday touched its weakest level in nearly five months at 1.3318, traded in a range of 1.3185 to 1.3259. For the week, the loonie fell 0.6 percent.
A large discount for Canadian heavy crude has added to the headwinds for Canada's energy sector. Western Canadian Select (WCS) traded last month as much as $52.50 per barrel below West Texas Intermediate light oil, the biggest differential in data going back to 2010, according to Shorcan Energy Brokers.
Economists say that if the price received by Canadian producers remains depressed, it could shave as much as 0.5 percent from Canada's economic growth next year.
U.S. and Canadian stock markets were also pressured on Friday by continued weakness in oil prices, while the U.S. dollar .DXY was boosted by declining risk appetite. government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 2 Canadian cents to yield 2.234 percent and the 10-year CA10YT=RR rising 24 Canadian cents to yield 2.341 percent.
The gap between Canada's 10-year yield and its U.S. equivalent widened by 1.3 basis points to a spread of 70.5 basis points in favor of the U.S. bond.