September 21, 2018 / 1:45 PM / 3 months ago

CANADA FX DEBT-C$ holds near 3-month high as inflation data boosts rate-hike bets

    * Canadian dollar at 1.2909, or 77.47 U.S. cents
    * Loonie is on track to rise 1 percent for the week
    * Price of U.S. oil rises 0.9 percent
    * Bond prices lower across the yield curve

    TORONTO, Sept 21 (Reuters) - The Canadian dollar was little
changed against the greenback on Friday, holding near its
highest in more than three months as data showing a pickup in
underlying inflation boosted bets for a Bank of Canada interest
rate hike next month.
    Canada's annual inflation rate dipped to 2.8 percent in
August from 3.0 percent in July, the seventh consecutive month
it has exceeded the Bank of Canada's 2.0 percent target,
Statistics Canada data indicated. All of the central bank's core
inflation measures were 2.0 percent or higher, for the first
time since February 2012.             
    Separate data showed that Canadian retail trade rose 0.3
percent in July from June.              
    The Bank of Canada has raised interest rates four times
since July 2017. Chances of another hike in October rose to
nearly 90 percent from 85 percent before the data, the overnight
index swaps market indicated.           
    At 9:14 a.m. EDT (1314 GMT), the Canadian dollar         
was trading nearly unchanged at 1.2909 to the greenback, or
77.47 U.S. cents.
    The currency, which touched its strongest in more than three
months on Thursday at 1.2885, traded in a range of 1.2886 to
1.2927.
    For the week, the loonie is on track to rise 1 percent. It
has been boosted by optimism that a deal would be reached to
renew the North American Free Trade Agreement.
    Still, Canada and the United States showed scant signs on
Thursday of reaching agreement to revamp NAFTA, and Canadian
officials made clear Washington needed to withdraw a threat of
possible autos tariffs, sources said.             
    Canada sends about 75 percent of its exports to the United
States, so its economy could be hurt if a deal is not reached.  
 
    The U.S. dollar        rose against most of its rivals but
was still on track for its biggest weekly drop in seven months
as stronger equity markets and rising bond yields fueled a rush
to buy riskier assets.             
    The price of oil, one of Canada's major exports, climbed
ahead of a meeting of OPEC and other large crude exporters that
will focus on production increases as U.S. sanctions restrict
Iranian exports. U.S. crude        prices were up 0.9 percent
at$70.93 a barrel.             
    Canadian government bond prices were lower across the yield
curve, with the 10-year             falling 16 Canadian cents to
yield 2.441 percent. On Thursday, the 10-year yield touched its
highest in nearly four months at 2.444 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
  
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