CANADA FX DEBT-C$ firms as U.S. CPI offsets soft Canada data

* C$ at C$0.9915 vs US$, or $1.0086
    * U.S. CPI data helps boost C$
    * Cdn factory data weighs
    * Bond prices mostly lower

    By Jon Cook	
    TORONTO, March 16 (Reuters) - The Canadian dollar
edged higher against its U.S. counterpart on Friday, helped by
data that showed U.S. inflation remained in check last month,
which offset a report showing weakness in the Canadian
manufacturing sector.	
    U.S. consumer prices rose by the most in 10 months in
February as the cost of gasoline spiked, a government report
showed on Friday, but there was little sign that underlying
inflation pressures were building up. 	
    The data was seen reducing the likelihood of the U.S.
Federal Reserve tightening monetary policy sooner than had been
anticipated, weakening the greenback against a range of
    The Canadian dollar turned positive and touched a session
high at C$0.9901 versus the U.S. dollar, or $1.01 following the
CPI data.	
    "We're having a significant weakening move in the U.S.
dollar," said Camilla Sutton, chief currency strategist at
Scotia Capital. "We had a big spike higher in the euro and a
decent spike higher in the Canadian dollar."	
    At around 10:52 a.m. (1452 GMT), the Canadian dollar
 stood at C$0.9915 versus the U.S. dollar, or $1.0086,
compared with Thursday's North American close at C$0.9922 versus
the U.S. currency, or $1.0079.	
    The Canadian dollar pared some gains after the Thomson
Reuters/University of Michigan's U.S. consumer sentiment gauge
slipped to 74.3 from 75.3 in February, shy of economists'
forecasts for a gain to 76.0. 	
    In Canada, manufacturing sales unexpectedly fell in January,
dragged down largely by the aerospace sector even while sales
from auto assembly plants rose to their highest level since
November 2007, Statistics Canada said on Friday. 	
    However, appetite for riskier and growth-oriented assets
remained strong, reflected by this week's large sell-off of
Canadian government bonds and U.S. Treasuries that has been
driven by expectations for stronger growth in the U.S. economy.
    The encouraging U.S. data has also prompted traders to
increase bets on the possibility of a Bank of Canada rate hike
in December. 	
    The Canadian central bank's target for the overnight rate -
its main policy tool - has been at 1 percent since 2010. In a
Reuters poll last month, economists predicted the central bank
would keep rates on hold until the second quarter of 2013.
    "Most of the news has been positive, so we now have the
market pricing in almost a 50-percent chance of a Bank of Canada
interest rate hike this year," said Sutton.	
    Canadian government bond prices fell again on Friday as risk
sentiment improved and investors bought up more equities,
forcing yields above Thursday's yearly highs.	
    The two-year bond was down 4 Canadian cents to
yield 1.296 percent, reaching the highest level since August.	
    The 10-year bond dropped 46 Canadian cents to
yield 2.257 percent. The yield touched 2.301, its highest level
since November.