CANADA FX DEBT-C$ hits four-month low as rates seen on hold

* C$ at C$1.0541 vs US$, or 94.87 U.S. cents
    * Annual inflation rate 0.7 percent in October
    * Bond prices higher across the curve

    By Leah Schnurr
    TORONTO, Nov 22 (Reuters) - The Canadian dollar touched a
more-than-four-month low against the greenback on Friday as
investors expected interest rates will remain on hold for some
time, a view reinforced by data that showed the annual inflation
rate fell to a 5-month low in October.
    Lower gasoline prices saw the inflation rate slow to 0.7
percent last month, weaker than the 0.9 percent economists' had
    The data highlighted how there was little pressure on the
Bank of Canada to raise interest rates. The central bank has
kept rates at 1 percent since September 2010 and recently
dropped any mention of an eventual rise in rates in a major
policy shift.
    A measure of core inflation, which strips out volatile items
and is closely watched by the Bank of Canada, was in line with
expectations, dipping to 1.2 percent from 1.3 percent.
    The Canadian dollar trimmed losses following the data that
was released along with a separate report that showed retail
sales rose more than expected in September. 
    Still, the loonie came under pressure for a second day after
dropping on Thursday following remarks from Bank of Canada
Governor Stephen Poloz that the central bank's economic analysis
differed from that of the Organization of Economic Cooperation
and Development (OECD), which had recommended that Canada start
raising interest rates as soon as 2014.. 
    "It's part of the more recent trend that has emerged since
yesterday of a weaker Canadian dollar, and perhaps that's
stemming from the view that some participants may think the Bank
could resort to a lower rate," said Mazen Issa, macro strategist
at TD Securities in Toronto.
    "In our opinion, it reinforces the view that the Bank's
going to be very much on the sidelines and stay very dovish with
regards to the outlook, but we see a rate cut as a low
    The Canadian dollar was at C$1.0541 versus the U.S.
dollar, or 94.87 U.S. cents, weaker than Thursday's close of
C$1.0521, or 95.72 U.S. cents. The loonie earlier in the morning
hit a low of C$1.0570, its weakest since early July.
     A recent Reuters poll of primary dealers showed the Bank of
Canada is expected to keep its key rate at 1 percent well into
    Canadian bond prices were higher across the maturity curve,
with the two-year bond up half a Canadian cent to
yield 1.103 percent, while the benchmark 10-year bond
 was up 28 Canadian cents to yield 2.588 percent.