CANADA FX DEBT-C$ touches six-week low after soft Canadian inflation data

* C$ at C$1.0549 vs US$, or 94.81 U.S. cents
    * CPI rate edges up to 1.3 pct in July from 1.2 pct in June
    * Bond prices fall on longer-term end of maturity curve

    By Solarina Ho
    TORONTO, Aug 23 (Reuters) - The Canadian dollar briefly
softened to a six-week low against the U.S. dollar on Friday
after Canadian inflation rose less than expected, suggesting the
country's interest rates will hold steady for some time.
    Canada's annual inflation rate edged up to 1.3 percent in
July from 1.2 percent in June, underlining how little pressure
the Bank of Canada is under to tighten policy, Statistics Canada
data indicated.
    Market operators had expected the rate to hit 1.4 percent.
The Bank of Canada aims to keep inflation at 2.0 percent.
    "Certainly with the wholesale trade earlier this week - that
was quite far off. You knew retail sales was going to have to be
down from what the expectations were," said Don Mikolich,
executive director, foreign exchange sales at CIBC World
    "But on the inflation side, there haven't been very many
signs that we'd be having too big a swing, or too many misses
there. So very little market reaction."
    Canadian wholesale trade fell by a larger-than-expected 2.8
percent in June from May, according to data released on Tuesday.
    The Canadian dollar was trading at C$1.0549 to the
U.S. dollar, or 94.81 U.S cents at 9:22 a.m. EDT (1322 GMT). It
briefly touched C$1.0569 to the U.S. dollar, or 94.62 U.S. cents
after the inflation data was released.
    The currency was weaker compared with Thursday's finish at
C$1.0516, or 95.09 U.S. cents.
    The currency, which was mostly underperforming its key
counterparts except for the Japanese yen and the New
Zealand dollar, was expected to trade between
C$1.0520 and C$1.0570 against the U.S. dollar on Friday, RBC
Capital said in a research note.
    The price of Canadian government debt was weaker across the
longer-term end of the maturity curve. The two-year bond
 slipped 1.5 Canadian cents to yield 1.213 percent,
while the benchmark 10-year bond fell 14 Canadian
cents to yield 2.763 percent.