CANADA FX DEBT-C$ eases as inflation data lifts U.S. currency

* Canadian dollar closes at C$1.0864 or 92.05 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds analyst's comments and updates figures)
    By Cameron French
    TORONTO, June 17 (Reuters) - The Canadian dollar slipped
against the U.S. currency on Tuesday as stronger-than-expected
U.S. inflation figures raised the specter that the U.S. Federal
Reserve might raise interest rates sooner than anticipated,
while some traders sat on their hands ahead of key domestic data
due at the end of the week.
    U.S. consumer prices recorded their largest gain in more
than a year in May, pointing to a firming of inflation pressures
just as the Fed begins a two-day policy meeting. 
    "We're not seeing high trading volumes and just a slightly
higher upward ebb in USD/CAD, which is the result of the
inflation data out of the U.S. this morning," said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    The Canadian dollar ended the North American
session at C$1.0864 to the U.S. dollar, or 92.05 U.S. cents,
down from Monday's close of C$1.0841 to the U.S. dollar, or
92.24 U.S. cents.
    Canadian inflation and retail sales data due on Friday could
sharpen the picture on the Canadian interest rate outlook. With
upward inflation pressure so far absent in Canada, investors
currently do not expect a rate hike until well into 2015.
    "There's the potential if we get an upside surprise with
inflation on Friday and some more optimistic data points out of
Canada over the next several weeks, we could see a break of the
C$1.08 (92.59 U.S. cent) level, but I think that's going to hold
up pretty well," Smith said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 2.7 Canadian
cents to yield 1.114 percent and the benchmark 10-year
 down 20 Canadian cents to yield 2.314 percent.

 (Reporting by Cameron French; Editing by Peter Galloway)