CANADA FX DEBT-C$ hits strongest level since July, then steadies
* Canadian dollar at C$1.2928, or 77.35 U.S. cents * Bond prices lower across the maturity curve TORONTO, Oct 15 (Reuters) - The Canadian dollar hit its strongest level against its U.S. counterpart since late July on Thursday, before pulling back after a rise in U.S. inflation offset recent weak data that could delay an expected increase in U.S. interest rates. The loonie, as Canada's currency is colloquially known, had gained sharply a day earlier as investors second-guessed whether the U.S. Federal Reserve would hike rates this year, given a string of weak U.S. and Chinese economic data. Stronger-than-expected U.S. inflation data on Thursday helped the greenback claw back some recent losses. * At 8:51 a.m. ET (1251 GMT), the Canadian dollar was trading at C$1.2928 to the greenback, or 77.35 U.S. cents, just weaker than the Bank of Canada's official close on Wednesday of C$1.2922, or 77.39 U.S. cents. * The currency's strongest level of the session was C$1.2874, a level last seen on July 29, while its weakest level was C$1.2947. It had traded above C$1.30 for most of October. * The Canadian economy probably rebounded from a mild recession last quarter, helped by solid U.S. demand for its exports, according to a Reuters poll, but the recovery was not seen as strong enough to warrant an interest rate rise until 2017. * U.S. crude prices were down 1.22 percent to $46.07 a barrel, while Brent crude lost 0.53 percent to $48.89. * The Canadian dollar, which was outperforming most of its key currency counterparts, is expected to trade between C$1.2855 and C$1.2945 against the U.S. dollar on Thursday, according to RBC Capital Markets. * Canadian government bond prices were lower across the maturity curve, with the two-year price down 2.5 Canadian cents to yield 0.534 percent and the benchmark 10-year falling 25 Canadian cents to yield 1.422 percent. * The Canada-U.S. two-year bond spread was -5.5 basis points, while the 10-year spread was -58.5 basis points. (Reporting by Alastair Sharp; Editing by Meredith Mazzilli)
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