CORRECTED-CANADA FX DEBT-C$ recovers from 4-month low ahead of inflation data
* C$ at C$1.0177 vs US$, or 98.26 U.S. cents * Bond prices edge lower across the curve * Canada inflation data due at 8:30 a.m.(12:30 GMT By Claire Sibonney TORONTO, May 18 (Reuters) - The Canadian dollar recovered from a more than four-month low against the U.S. currency on Friday, tracking U.S. stock futures slightly higher after a steep selloff in riskier assets this week on the back of Europe's escalating debt crisis. U.S. stock index futures edged up but major global indexes were set up to close their worst week of the year, but Facebook's long-expected debut could help lift otherwise battered investor sentiment. The Canadian dollar has shown a strong correlation with U.S. equities and volatility, with the currency falling more than 3 percent this week, to back below 98 U.S. cents on Friday. The large weekly decline came amid uncertainty over a political crisis in Greece and whether that could trigger a sovereign debt default and possible exit from the euro zone. The cost to insure Spanish government debt against default hit record highs Friday, a day after Moody's cut its rating on Spanish banks en masse, heightening fears of contagion from the Greek political crisis. "It felt like people were bracing themselves for financial market Armageddon," said Jeremy Stretch, head of currency strategy at CIBC in London. "There might be a little of consolidation today but it's more of a case of looking to lock in a little bit of profit after a pretty violent week and I think people will come back and reassess at the beginning of next week." At 8:01 a.m. (1201 GMT) Canadian dollar stood at C$1.0177 versus the U.S. dollar, or 98.26 U.S. cents, up from Thursday's North American session close at C$1.0191 versus the U.S. dollar, or 98.13 U.S. cents. Earlier, the currency dropped as low as C$1.0227, or 97.78 U.S. cents, its weakest since Jan. 16. On the data front, markets will be keeping a close eye on Canadian inflation figures for April on Friday. According to a Reuters poll, Canadian consumer prices likely remained subdued, suggesting price pressures are the least of the Bank of Canada's worries. "Unless it's materially away from expectations, I think it will be certainly monitored but probably broadly sidelined as far as being a market mover," added Stretch. He noted that the Canadian dollar must close substantially below C$1.0140 versus the U.S. dollar, or 98.62 U.S. cents, in order to see a potential turn in sentiment for the domestic currency. Canadian bond prices edged lower across the curve, with the two-year government bond down 3 Canadian cents to yield 1.230 percent, and Canada's 10-year bond off 15 Canadian cents to yield 1.897 percent.
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