CANADA FX DEBT-C$ dips as inflation data support Bank of Canada's dovish stance

    * Canadian dollar at C$1.3374, or 74.77 U.S. cents
    * Bond prices higher across yield curve

    TORONTO, March 24 (Reuters) - The Canadian dollar weakened
on Friday against its U.S. counterpart as tame domestic
inflation data dampened pressure on the Bank of Canada to turn
more hawkish, offsetting the impact of higher oil prices.
    Canada's annual inflation rate dipped to 2.0 percent in
February from 2.1 percent in January, Statistics Canada said.
Analysts in a Reuters poll had expected the inflation rate to
remain at 2.1 percent.             
    Three new measures established by the Bank of Canada late
last year showed core inflation below its target.
    "The fact that the average of the central tendency core
measures is largely unchanged, on average well beneath the Bank
of Canada's 2 percent target, will keep them dovish," said Derek
Holt, head of capital markets economics at Scotiabank.
    The central bank has left interest rates unchanged since
cutting its policy rate to 0.50 percent in July 2015.
    Prices of oil, one of Canada's major exports, were boosted
by hopes that an Organization of the Petroleum Exporting
Countries output cut was beginning to balance a
long-oversupplied market.             
    U.S. crude        prices were up 0.40 percent at $47.89 a
    At 9:12 a.m. EDT (1312 GMT), the Canadian dollar         
was trading at C$1.3374 to the greenback, or 74.77 U.S. cents,
weaker than Thursday's close of C$1.3351, or 74.90 U.S. cents.
    The currency traded in a range of C$1.3348 to C$1.3385.
    The U.S. dollar        edged lower against a basket of major
currencies as investors braced for a vote in Congress on Friday
on a bill to begin dismantling the Obamacare healthcare law. The
vote is seen as a test of President Donald Trump's ability to
deliver on his promises of tax cuts and infrastructure spending.
    New orders for key U.S.-made capital goods unexpectedly fell
in February, but a surge in shipments amid demand for machinery
and electrical equipment supported expectations for an
acceleration in business investment in the first quarter.
    TransCanada Corp          said the U.S. Department of State
has issued a presidential permit for the construction of the
Keystone XL oil pipeline, which would bring more than 800,000
barrels of heavy crude per day from Canada's oil sands to U.S.
refineries and ports along the Gulf of Mexico.             
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 1 Canadian cent to yield
0.767 percent and the 10-year             rising 13 Canadian
cents to yield 1.672 percent.
    The 2-year yield fell 1.9 basis points further below its
U.S. equivalent to a spread of -49.4 basis points as Canadian
bonds outperformed.

 (Reporting by Fergal Smith; Editing by Paul Simao)