TORONTO, April 21 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, extending this week's decline, as preliminary domestic data showed retail sales falling for a second straight month in March.
The loonie was trading 0.4% lower at 1.3530 to the greenback, or 73.91 U.S. cents, after touching its weakest intraday level since April 10 at 1.3536.
For the week, it was on track to decline 1.2% as the price of oil, one of Canada's major exports, fell and investors raised bets on an interest rate hike next month by the Federal Reserve.
Canadian retail sales fell 0.2% in February from January, data from Statistics Canada showed. That was a smaller decline than the 0.6% decrease economists had expected but an advance estimate showed sales falling 1.4% in March.
"The flash estimate suggests that consumers might be starting to feel the pinch from higher interest rates," Tiago Figueiredo, a macro strategist at Desjardins, said in a note.
"This reinforces the Bank of Canada's view that the Canadian economy is set to decelerate and shouldn't require any further rate increases."
Investors are betting that the Canadian central bank will shift to cutting interest rates by the end of the year after it paused its tightening cycle in March, money market data showed.
Oil clawed back some of this week's decline, rising 1.1% to $78.25 a barrel, as data showed the euro zone recovery gathering pace unexpectedly.
Canadian government bond yields were lower across the curve. The 2-year dropped 10.9 basis points to 3.697%, while it was trading 4 basis points further below its U.S. counterpart to a gap of about 40 basis points.
