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TORONTO (Reuters) - The Canadian dollar was slightly lower against its U.S. counterpart on Tuesday as some stronger-than-expected domestic data was not enough to offset weaker commodity prices and a stronger greenback.
Domestic bond prices were mixed as early gains were largely reversed after a higher-than-expected U.S. inflation report.
At 9:30 a.m. (1330 GMT), the Canadian dollar was at C$1.0645 to the U.S. dollar, or 93.94 U.S. cents, down from C$1.0643 to the U.S. dollar, or 93.96 U.S. cents, at Monday's close.
The Canadian dollar spent the overnight session in a tight range of C$1.0669 and C$1.0632, slowly slipping against the U.S. dollar as commodity prices weakened.
U.S. crude oil fell below $112 a barrel, having since bounced back some, and gold prices sank well below $800 an ounce.
Canada's oil sands contain the largest oil reserves outside the Middle East and is a net exporter of many key commodities.
During the North American session, data showing that U.S. producer prices rose more than expected helped the greenback extend its gains across nearly all major currencies.
The market had been more focused on economic growth concerns, but the U.S. data puts inflation back in the spotlight, and could point to higher U.S. interest rates in the not-too-distant future.
At the same time the U.S. data was released, a Canadian report showed that a surge in auto sales helped Canadian wholesale trade grow to its largest margin since February, and ahead of market expectations.
While the trade data did little to help the Canadian dollar against the strengthening greenback, it may have been responsible for gains elsewhere, said Adam Cole, head currency strategist at RBC Capital Markets in London.
"It looks like Canada is outperforming most of the other majors... so I suspect that the domestic data flow probably helped," he said.
Key Canadian data due later in the week include a retail sales report for June on Wednesday and inflation numbers for July on Thursday.
The data could offer clues as to what the Bank of Canada will do when it next sets rates on September 3.
Canadian bond prices had risen earlier in the session along with the larger U.S. market on credit worries, but then lost most of their gains after the U.S. inflation numbers.
"While there is a sense that inflation fever has likely broken with oil prices off so much from the high, these numbers are still unsettling to say the least and hint that there may have been a bit more of an underlying inflation problem prior to the break in oil prices," said Doug Porter, deputy chief economist at BMO Capital Markets.
The overnight Canadian Libor rate was 2.9883 percent, down from 3.0683 percent on Monday.
Monday's CORRA rate was 3.0128 percent, up from 3.0010 percent on Friday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond rose 7 Canadian cents to C$101.83 to yield 2.686 percent. The 10-year bond fell 7 Canadian cents to C$105.80 to yield 3.542 percent.
The yield spread between the two-year and 10-year bond was 88.6 basis points, up from 85.0 basis points at the previous close.
The 30-year bond lost 25 Canadian cents to C$117.00 for a yield of 4.000 percent. In the United States, the 30-year treasury yielded 4.442 percent.
The three-month when-issued T-bill yielded 2.54 percent, unchanged from the previous close.
Editing by Scott Anderson