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CANADA FX DEBT-C$ hits two-week high after data, GDP next focus

* Canadian dollar at C$1.2741, or 78.36 U.S. cents

* Bond prices lower across the maturity curve

* 2-year yield at highest since 2011 as rate hike bets jump

TORONTO, Dec 21 (Reuters) - The Canadian dollar hit its strongest level against its U.S. counterpart in more than two weeks on Thursday, boosted by strong inflation and retail sales data that raised expectations the Bank of Canada could hike rates again as soon as January. The yield on Canadian 2-year bonds also surged to their highest since 2011, while their spread versus U.S. equivalents narrowed to the closest in more than a month as markets priced in a nearly 50 percent chance the central bank hikes in January.

Monthly gross domestic product data for October is due on Friday, with market participants bracing for a stronger-than-expected number following Thursday's data and robust wholesale trade numbers for October released on Wednesday. "Improving data over the past few days will have to be weighed against upcoming NAFTA discussions and the bank will have to decide on whether a rate hike sooner than later is justified," said Don Mikolich, executive director of foreign exchange sales at CIBC Capital Markets, which is currently not forecasting a rate hike until the second half of 2018.

At 4 p.m. ET (2100 GMT), the Canadian dollar was

trading at C$1.2741 to the greenback, or 78.36 U.S. cents, up 0.7 percent. It touched C$1.2700 during the session, its strongest since Dec. 6. Canadian government bond prices fell across the maturity

curve, with the two-year price down 7.5 Canadian

cents to yield 1.681 percent and the benchmark 10-year falling 32 Canadian cents to yield 2.03 percent, its highest yield in almost two months. The Canada-U.S. two-year bond spread narrowed to -20.1 basis points, while the 10-year spread came in to -45.2 basis points.

(Reporting by Alastair Sharp; Editing by Bernadette Baum and Chris Reese)