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CANADA FX DEBT-C$ hits 3-week low as soft inflation revives rate cut threat

* Canadian dollar at $1.3491, or 74.12 U.S. cents

* Bond prices lower across the yield curve

TORONTO, Dec 22 (Reuters) - The Canadian dollar tumbled to a three-week low against its U.S. counterpart on Thursday, pressured by domestic inflation data that reminded the market of the risk of further interest rate cuts from the Bank of Canada. Canada's annual inflation slowed in November to 1.2 percent from a rate of 1.5 percent in October, with prices for food and clothing declining, Statistics Canada said. The central bank's new measures for core inflation also weakened, and the report eclipsed data showing a much stronger-than-expected rise of 1.1 percent in Canadian retail sales for October. "To the extent that a (Bank of Canada interest) rate cut was discussed in October, I don't think today's numbers rule that out," said Desjardins Senior Economist Jimmy Jean. The recent fall in Canada's bond yields below U.S. Treasuries has weighed on the loonie as investors brace for divergence in monetary policy between the Federal Reserve and the Bank of Canada. Canada's central bank last cut in July 2015 to leave its policy rate at 0.50 percent. At 9:44 a.m. EST (1444 GMT), the Canadian dollar was trading at C$1.3491 to the greenback, or 74.12 U.S. cents, weaker than Thursday's close of C$1.3407, or 74.59 U.S. cents. The loonie's strongest level of the session was C$1.3414, while it touched its weakest since Nov. 28 at C$1.3520. U.S. President-elect Donald Trump named Peter Navarro, an economist who has urged a hard line on trade with China, to head a newly formed White House National Trade Council, the transition team said on Wednesday. Trump has also vowed to renegotiate the North American Free Trade Agreement with Canada and Mexico, saying it had cost Americans jobs. Economists worry that an uncertain outlook for trade deals will derail an expected pickup in Canada's business spending. U.S. crude prices were up 0.50 percent at $52.75 a barrel despite an unexpected rise in U.S. crude inventories last week and moves by Libya to boost output over the next few months. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 1.5 Canadian cents to yield 0.84 percent, and the benchmark 10-year declined 16 Canadian cents to yield 1.822 percent. One week ago, the 10-year yield touched its highest since June 2015 at 1.859 percent. Canada's gross domestic product data for October is due on Friday.

(Reporting by Fergal Smith; Editing by Lisa Von Ahn)