* 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 Securities. Chances of another interest rate hike by April held at less than 20 percent after the data, the overnight index swaps market indicated. 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)
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