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CANADA FX DEBT-Canadian dollar steadies as annual inflation stays near zero

    * Canadian dollar was unchanged against the greenback
    * Canada's annual inflation rate remains at 0.1% in August 
    * Price of U.S. oil increases 2.7%
    * Canadian bond yields ease across the curve

    TORONTO, Sept 16 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Wednesday as domestic
data showed barely any inflation in August, with the currency
trading in a narrow range ahead of a Federal Reserve interest
rate decision.    
    Canada's annual inflation rate remained at 0.1% in August as
rising food prices were offset by declining gasoline costs,
Statistics Canada said. Underlying inflation was firmer, with
the average of the Bank of Canada's three core measures of
inflation ticking up to 1.7% from 1.6%.             
    Oil, one of Canada's major exports, rose for a second day as
a hurricane closed U.S. offshore production and an industry
report showed U.S. crude inventories unexpectedly decreased.
U.S. crude oil futures were up 2.7% at $39.32 a barrel.
            
    The U.S. dollar        fell across the board ahead of the
first Fed interest rate decision since the central bank said
that it would pursue average inflation targeting.             
    The Canadian dollar        was trading unchanged at 1.3181
to the greenback, or 75.87 U.S. cents. The currency traded in a
range of 1.3155 to 1.3200.
    Setting a target for bond yields could help the Bank of
Canada reduce the amount of debt it buys to keep interest rates
low, checking a threat to market liquidity after the central
bank's share of bonds more than doubled this year, strategists
said.             
    Canadian government bond yields were lower across the curve
in sympathy with U.S. Treasuries after data showed that U.S.
consumer spending appeared to slow in August. The 10-year
            was down 2.3 basis points at 0.534%.             
    Canada's retail sales report for July is due on Friday.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky)
  
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