CANADA FX DEBT-C$ keeps pace with greenback as trade optimism rises

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    * Canadian dollar falls 0.1 percent for the week
    * Price of U.S. oil rises 3.3 percent
    * Canada's annual inflation rate rises to 2 percent
    * Bond prices fall across the yield curve
    * 10-year yield touches its highest in one month

    By Fergal Smith
    TORONTO, Jan 18 (Reuters) - The Canadian dollar was little
changed against its broadly stronger U.S. counterpart on Friday,
supported by hopes of a possible end to the U.S.-China trade war
and domestic data showing that inflation rose more than expected
in December.
    Wall Street and oil prices moved higher after a Bloomberg
report said China sought to raise its annual goods imports from
the United States by a combined value of more than $1 trillion
in order to reduce its trade surplus to zero by 2024.
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from an improved outlook for global
    U.S. crude oil futures        settled 3.3 percent higher at
$53.80 a barrel. Oil has rebounded about 27 percent since
slumping to an 18-month low in December.
    The recent rally in stocks and oil prices could encourage
the Bank of Canada to consider an interest rate hike sooner than
the market anticipates, said Michael Goshko, corporate risk
manager at Western Union Business Solutions.
    "That expectation is beginning to build back into the market
after the sharp equity selloff had a large contractionary effect
on bond yields and on monetary policy expectations for 2019,"
Goshko said.
    Chances of a Bank of Canada interest rate hike by April
climbed to 25 percent from less than 20 percent the day before,
data from the overnight index swaps market showed.           
    Increased chances of an interest rate hike over the coming
months came as data showed that Canada's annual inflation rate
climbed in December, matching the Bank of Canada's 2 percent
target. Still, economists said that the central bank would pay
more attention to underlying price pressures, which were stable
and below target.             
    At 3:46 p.m. PM EST (2046 GMT), the Canadian dollar         
was trading nearly unchanged at 1.3277 to the greenback, or
75.32 U.S. cents. It was the only G10 currency not to lose
ground against the U.S. dollar       .             
    For the week, the loonie declined 0.1 percent.        
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
fell 6.5 Canadian cents to yield 1.944 percent and the 10-year
            declined 29 Canadian cents to yield 2.032 percent.
    The 10-year yield touched its highest intraday since Dec. 18
at 2.049 percent.

 (Reporting by Fergal Smith
Editing by Susan Thomas)