* C$ at C$1.0177 vs US$, or 98.26 U.S. cents
* Bond prices edge lower across the curve
* Canada inflation data due at 8:30 a.m.(12:30 GMT
By Claire Sibonney
TORONTO, May 18 (Reuters) - The Canadian dollar recovered
from a more than four-month low against the U.S. currency on
Friday, tracking U.S. stock futures slightly higher after a
steep selloff in riskier assets this week on the back of
Europe's escalating debt crisis.
U.S. stock index futures edged up but major global indexes
were set up to close their worst week of the year, but
Facebook's long-expected debut could help lift otherwise
battered investor sentiment.
The Canadian dollar has shown a strong correlation
with U.S. equities and volatility, with the currency falling
more than 3 percent this week, to back below 98 U.S. cents on
Friday.
The large weekly decline came amid uncertainty over a
political crisis in Greece and whether that could trigger a
sovereign debt default and possible exit from the euro zone.
The cost to insure Spanish government debt against default
hit record highs Friday, a day after Moody's cut its rating on
Spanish banks en masse, heightening fears of contagion from the
Greek political crisis.
"It felt like people were bracing themselves for financial
market Armageddon," said Jeremy Stretch, head of currency
strategy at CIBC in London.
"There might be a little of consolidation today but it's
more of a case of looking to lock in a little bit of profit
after a pretty violent week and I think people will come back
and reassess at the beginning of next week."
At 8:01 a.m. (1201 GMT) Canadian dollar stood at
C$1.0177 versus the U.S. dollar, or 98.26 U.S. cents, up from
Thursday's North American session close at C$1.0191 versus the
U.S. dollar, or 98.13 U.S. cents. Earlier, the currency dropped
as low as C$1.0227, or 97.78 U.S. cents, its weakest since Jan.
16.
On the data front, markets will be keeping a close eye on
Canadian inflation figures for April on Friday. According to a
Reuters poll, Canadian consumer prices likely remained subdued,
suggesting price pressures are the least of the Bank of Canada's
worries.
"Unless it's materially away from expectations, I think it
will be certainly monitored but probably broadly sidelined as
far as being a market mover," added Stretch.
He noted that the Canadian dollar must close substantially
below C$1.0140 versus the U.S. dollar, or 98.62 U.S. cents, in
order to see a potential turn in sentiment for the domestic
currency.
Canadian bond prices edged lower across the curve, with the
two-year government bond down 3 Canadian cents to
yield 1.230 percent, and Canada's 10-year bond off
15 Canadian cents to yield 1.897 percent.