* Canadian dollar at C$1.2286, or 81.39 U.S. cents
* Loonie touches its strongest since Sept. 22 at C$1.2283
* Canadian retail sales rise 0.2 percent in November
* Bond prices mixed across a flatter yield curve
TORONTO, Jan 25 (Reuters) - The Canadian dollar strengthened to a four-month high against its U.S. counterpart on Thursday as oil prices rose and the greenback broadly fell, while domestic data showed a smaller-than-expected gain for retail sales. At 9:05 a.m. EST (1405 GMT), the Canadian dollar was trading 0.5 percent higher at C$1.2286 to the greenback, or 81.39 U.S. cents. The currency's weakest level of the session was C$1.2355, while it touched its strongest since Sept. 22 at C$1.2283.
U.S. crude prices were up 1.30 percent at $66.46 a
barrel, supported by producer supply curbs, a record-breaking run of declines in U.S. crude inventories and a weaker U.S.
The greenback fell to a three-year low against a basket currencies, while the euro climbed as investors weighed comments from European Central Bank President Mario Draghi.
Canadian retail sales rose 0.2 percent in November, shy of economists' expectations for 0.7 percent, as higher sales of gasoline and electronics were tempered by a decline in new car purchases. Sales volumes were up 0.3 percent. Canada's inflation report for December is due on Friday, which could help guide expectations for further Bank of Canada interest rate hikes. Bank of Canada Governor Stephen Poloz said on Thursday that even he did not know what potential there may be for further hikes this year, reiterating that policymakers remained both data dependent and alert to developments with the North American Free Trade Agreement. Canada's foreign minister and Mexico's economy minister struck an upbeat note on the outlook for talks with the United States on NAFTA, saying they agreed the deal needed modernizing.
Canadian government bond prices were mixed across a flatter yield curve in sympathy with U.S. Treasuries.
The 10-year fell 3 Canadian cents to yield 2.268
percent. On Wednesday, the 10-year yield touched its highest since September 2014 at 2.271 percent.
(Reporting by Fergal Smith; Editing by Bernadette Baum)