CANADA FX DEBT-C$ retreats as price of oil sinks to 10-month low

* Canadian dollar at C$1.3318, or 75.09 U.S. cents

* Loonie touches its weakest since Thursday at C$1.3348

* Bond prices higher across yield curve

* Bank of Canada auction of C$3 billion 10-year bonds yields avg 1.504 pct

TORONTO, June 21 (Reuters) - The Canadian dollar softened on Wednesday to its weakest close in 1-1/2 weeks against the U.S. dollar as depressed oil prices offset the Bank of Canada's shift to a more hawkish stance. The Bank of Canada's top two officials said last week that rate cuts put in place in 2015 had largely done their work, and the bank would assess whether rates need to be kept at near-record lows. But with the price of oil, a main Canadian export, hitting a 10-month low, having dropped some 20 percent since peaking in late February, some currency strategists said it was wiping out expectations the central bank could raise rates sooner rather than later. "It's really changed the tone that we saw over the last couple of weeks where we saw the loonie rising on the basis of strong economic fundamentals," said Rahim Madhavji, president at KnightsbridgeFX.com, who is expecting the Canadian dollar to struggle over the next couple of quarters. "I think the rosiness of the loonie is gone ... It's back to grinding lower." At 4:00 p.m. EDT (2000 GMT), the Canadian dollar was trading at C$1.3318 to the greenback, or 75.09 U.S. cents, down 0.4 percent. The currency's strongest level of the session was C$1.3263, while it touched its weakest in 1-1/2 weeks at C$1.3348.

U.S. crude prices were down 2.3 percent to $42.51 a

barrel as growing U.S. production and reduced Chinese refinery activity fed mounting concern over excess global supply. Canadian government bond prices were mostly higher across

the yield curve, with the two-year up half a Canadian cent to yield 0.908 percent and the 10-year rising

10 Canadian cents to yield 1.489 percent. The Bank of Canada's auction of C$3 billion 10-year bonds on behalf of the federal government yielded an average 1.504 percent. Canadian retail sales data for April is due out on Thursday,

while inflation data for May is due on Friday .

(Additional reporting by Fergal Smith, editing by G Crosse and Grant McCool)