TORONTO (Reuters) - Canada's currency retreated sharply versus the US dollar yesterday, touching its lowest level in nearly three weeks, as a pull-back in oil prices and equities spoiled investor appetite for riskier assets.

The move was compounded by a stronger greenback, which rose on its safe-haven allure after US data showed a surprise drop in sales of existing homes in August and hinted at a less than vigorous pace of economic recovery.

At mid-afternoon, the Canadian dollar dropped as low as C$1.0949 to the US dollar, or 91.33 US cents, its lowest level since September 4.

"It really got hit with the ugly stick today," said Steve Butler, director of foreign exchange trading at Scotia Capital. "You just can't fight it on a day like today when we've had a really healthy correction."

The currency faced pressure from oil prices that dropped more than four percent to below $66 a barrel. Canada is a major oil exporter and its currency often moves in line with prices for the commodity.

North American equities also ended lower, with the Toronto stock market's S&P/TSX composite index sliding two percent or 231.78 points to its lowest close at 11,285.76 in nearly two weeks.

The Canadian dollar later moved off its session low but still ended down for the session, closing at C$1.0890 to the US dollar, or 91.83 US cents, down from C$1.0751 to the US dollar, or 93.01 US cents, at Wednesday's close.

Mr. Butler said news that some central banks, including the US Federal Reserve, pared back emergency lending facilities also helped to pull the rug from under the Canadian currency. .

The Bank of Canada said Tuesday it would scrap two special lending facilities at the end of next month because of "improved conditions".

Canadian bond prices ended a touch higher across the curve, mirroring a move in the bigger US Treasuries market, after the US home sales data.

"We just followed the US, but the gains on the bond market weren't anything spectacular," said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment.

Dong also said the Bank of Canada's C$3 billion auction of two percent Government of Canada bonds due on December 1, 2014 attracted fairly solid demand.

The two-year bond ended up one Canadian cent at C$99.49 to yield 1.271 percent, while the 10-year bond rose 15 Canadian cents to C$102.90 to yield 3.395 percent.

The 30-year bond gained 45 Canadian cents to C$118.45 to yield 3.903 percent.

Canadian bonds outperformed their US counterparts across much of the curve. The Canadian 30-year bond was 27.2 basis points below the US 30-year yield, versus 26.6 basis points on Wednesday.