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Loonie strengthens as domestic inflation beats estimates

* Canadian dollar rises 0.4% against the greenback * Canada’s annual inflation rate held steady in July at 2.0% * U.S. oil prices increase by 1.4% * Bond prices move lower across the yield curve By Levent Uslu TORONTO, Aug 21 (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Wednesday, rebounding from a two-month low it hit the previous session, after stronger-than-expected domestic inflation data. Canada’s annual inflation rate held steady in July at 2.0% as lower costs for services were offset by higher prices for durable goods. Analysts had expected the annual rate to fall to 1.7% from 2.0% in June. The Canadian dollar was trading 0.4% higher at 1.3263 to the greenback, or 75.40 U.S. cents, at 9:43 a.m. ET (1343 GMT). The currency, which on Tuesday touched its weakest intraday level since June 19, was trading in a range of 1.3254 to 1.3324. The rise for the loonie came as the price of oil, one of Canada’s major exports, rose on Wednesday after industry data showed a larger than expected drop in U.S. crude inventories, but gains were capped by lingering worries about a possible global recession. U.S. crude oil futures were up 1.4% at $56.94 a barrel. Canada’s retail sales data is due on Friday, with a Reuters poll forecasting a 0.1% decrease, which could help guide expectations about the Bank of Canada’s interest rate decision. Canadian government bond prices were lower across the yield curve, with the two-year down 7.5 Canadian cents to yield 1.382% and the 10-year falling 54 Canadian cents to yield 1.214%. (Reporting by Levent Uslu; editing by Jonathan Oatis)

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