(Adds analyst quotes and details throughout; updates prices) * Canadian dollar weakens 0.2% against the greenback * Loonie touches its strongest level since March 22 at 1.2476 * Canadian factory sales fall 1.6% in February * Canadian 10-year yield hits a 5-week low at 1.434% By Fergal Smith TORONTO, April 15 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Thursday as domestic data showed a bigger-than-expected drop in factory sales and investors weighed restrictions on the economy, with the loonie pulling back from an earlier three-week high. The loonie was trading 0.2% lower at 1.2543 to the greenback, or 79.73 U.S. cents, the weakest performance among G10 currencies. It touched its strongest intraday level since March 22 at 1.2476. The manufacturing data "may have just helped USD-CAD avoid going sub-1.25 and staying there for the remainder of the session," said Amo Sahota, director at Klarity FX in San Francisco. Canadian manufacturing sales decreased 1.6% in February from January, compared with expectations for a 1% decline, amid a shortage of semiconductors that has stalled production at some auto plants, Statistics Canada said. Lockdowns in some provinces to contain the coronavirus pandemic could also be weighing on the loonied, but it is likely a pause in momentum before the currency takes another leg higher, Sahota said. Canada is battling a third wave of the virus. Last Thursday, Ontario, Canada"s most populous province, began a four-week stay-at-home order. Analysts expect the loonie, which has gained 1.5% since the beginning of the year, to benefit from a potential reduction by the Bank of Canada of its bond purchases, a Reuters poll showed this month. The central bank, which is due to make an interest rate decision next week, has become increasingly concerned in recent months that housing gains are being driven by excessive exuberance. A measure of home prices rose 20.1% year-over-year in March, the Canadian Real Estate Association said. Canadian government bond yields fell across a flatter curve, tracking U.S. Treasuries. The 10-year touched its lowest since March 11 at 1.434% before rebounding to 1.469%, down 5.9 basis points on the day. (Reporting by Fergal Smith; editing by Jonathan Oatis)