CANADA FX DEBT-C$ firms amid hopes U.S.-China trade war will end

    * Canadian dollar rises 0.1 percent against the greenback
    * Price of U.S. oil rises 1 percent
    * Canada's annual inflation rate rises to 2 percent
    * Bond prices fall across the yield curve

    By Fergal Smith
    TORONTO, Jan 18 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Friday as hopes of a possible
end to the U.S.-China trade war boosted stocks and oil prices,
while domestic data showed that inflation rose more than
expected in December.
     Canada's annual inflation rate rose to 2.0 percent from 1.7
percent in November as rising air transportation and telephone
service costs offset lower energy prices, Statistics Canada
said. The median prediction of analysts was for annual inflation
of 1.7 percent.             
    But economists said the impact on the index of a 22 percent
jump in airfares will reverse over the coming months and that
the Bank of Canada, which has hiked interest rates five times
since July 2017, will pay more attention to its three measures
of core inflation. Those measures were stable and held below the
central bank's target of 2 percent.
    "They are going to look through this because we have seen
these big swings in air travel prices moving the index around
quite a bit," said Andrew Kelvin, senior rates strategist at TD
    Chances of another interest rate hike by April held at less
than 20 percent after the data, the overnight index swaps market
    Canada's economy is clawing its way through a soft patch,
which will delay the next interest rate hike until at least
April, according to economists polled by Reuters, who said the
Bank of Canada would be less aggressive in tightening credit
this year.             
    At 9:28 a.m. EST (1428 GMT), the Canadian dollar         
was trading 0.1 percent higher at 1.3264 to the greenback, or
75.39 U.S. cents. The currency, which touched its weakest on
Thursday in more than one week at 1.3319, traded in a range of
1.3232 to 1.3283.
    U.S. stocks were boosted by hopes that a bitter trade war
between the United States and China would be resolved.
    Canada exports many commodities, including oil, so its
economy could benefit from an improved outlook for global trade.
    The price of oil, one of Canada's major exports, rose after
an OPEC report showed its production fell sharply last month.
U.S. crude        prices were up 1 percent at $52.61 a barrel.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries, with the 10-year
            falling 17 Canadian cents to yield 2.018 percent.

 (Reporting by Fergal Smith)