CANADA FX DEBT-C$ stung by return to risk aversion, bonds up
* Canadian dlr falls half a cent on risk aversion
* Bonds rise on sagging equities
* Canadian inflation softens in July
TORONTO, Aug 19 (Reuters) - Canada's dollar was little changed versus the U.S. currency on Wednesday after Canadian inflation data, but held lower from the previous session, as investors bailed out of riskier currencies as doubt resurfaced about the global recovery.
Currencies have lately been keying off stock market moves and as Chinese shares extended losses. European shares were also knocked lower, inspiring a flight to the relative safety of the greenback and yen. [ID:nLJ548765]
U.S. stock index futures slid about 1 percent.
Canada's annual inflation rate hit a 56-year-low in July, when prices fell by 0.9 percent from a year earlier on sharply lower energy prices, Statistics Canada said. [ID:nN19458137]
The core annual inflation rate -- closely watched by the Bank of Canada -- dropped to 1.8 percent from 1.9 percent in June.
The report did not influence the Canadian currency, nor domestic bonds, because it was fairly in line with forecasts and it did not change expectations of Bank of Canada policy action.
"It won't mean a whole lot. The miss isn't too outside market expectations. But on the surface it's probably a bit bearish for the Canadian dollar in that it reinforces the message that the Bank of Canada won't be tightening policy for a long time," said Sal Guatieri, senior economist BMO Capital Markets.
At 7:40 a.m. (1140 GMT), the Canadian dollar CAD= was at C$1.1079 to the U.S. dollar, or 90.26 U.S. cents, down from C$1.1018 to the U.S. dollar, or 90.76 U.S. cents, at Tuesday's close.
Canadian bonds CABONDT made healthy gains on the back of sliding equities. The two-year Canadian bond was up 6 Canadian cents at C$99.48 to yield 1.260 percent, while the 10-year bond rose 30 Canadian cents to C$103 to yield 3.386 percent.
The 30-year bond jumped 45 Canadian cents to C$118.95 to yield 3.879.
(Reporting by Ka Yan Ng and Scott Anderson; editing by Jeffrey Benkoe)
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