CANADA FX DEBT-C$ hits new 11-1/2-year low, recovers somewhat with oil

* Canadian dollar at C$1.3938, or 71.75 U.S. cents
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, Dec 18 (Reuters) - The Canadian dollar hit a more
than 11-year low on Friday after weak domestic data fed concerns
that the Bank of Canada will need to renew rate cuts, although
it pared losses as crude oil prices stabilized.
    The loonie, as Canada's currency is colloquially known, is
on track for a 1.4 percent fall for the week.
    Canada's annual inflation rate rose to 1.4 percent, a touch
shy of economists' forecasts for a rise to 1.5 percent. Closely
watched core inflation, which strips out volatile items, dipped
to 2.0 percent, which was also short of expectations.
    Bipan Rai, director of foreign exchange strategy at CIBC
Capital Markets, said the disappointing figures "still augur for
a weaker loonie in the months to come." 
    Wholesale trade dropped by 0.6 percent in October from
September, the fourth consecutive monthly decline, and far short
of the analysts' average forecast for a 0.1 percent gain.
    U.S. crude prices were up 0.14 percent at $35.00 a
barrel, recovering from a nearly seven-year-low at $34.39.
    Brent crude added 0.16 percent to $37.12. 
    At 9:51 a.m. EST (1451 GMT), the Canadian dollar 
was trading at C$1.3938 to the greenback, or 71.75 U.S. cents,
stronger than the Bank of Canada's official close of C$1.3950,
or 71.68 U.S. cents.
    The currency's strongest level of the session was C$1.3906,
while it hit its weakest level since May 2004 at C$1.4003
following the domestic data.
    The Bank of Canada has remained on hold since its last rate
cut in July, but more weakening in crude oil prices has left the
market leaning toward additional policy easing. 
    Canadian government bon prices were higher across the
maturity curve, together with gains for U.S. Treasuries.
    The two-year price was up 4.5 Canadian cents to
yield 0.499 percent, and the benchmark 10-year rose
32 Canadian cents to yield 1.395 percent.
    The curve flattened further, as the spread between the
2-year and 10-year yields narrowed by 1.3 basis points to 89.6
basis points, indicating outperformance for longer-dated

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn)