CANADA FX DEBT-C$ notches 2-week high on U.S. inflation miss

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2996, or 76.95 U.S. cents
    * Trudeau says he wants a good NAFTA deal as soon as
    * Canadian oil trades at biggest discount in nearly five
    * Bond prices edge higher across the yield curve

    By Fergal Smith
    TORONTO, Sept 13 (Reuters) - The Canadian dollar firmed to a
two-week high against its U.S. counterpart on Thursday as
tamer-than-expected U.S. inflation data weighed on the
greenback, offsetting a pullback in crude oil prices.
    The greenback        fell to a near 1-1/2-month low against
a basket of currencies after data showed U.S. consumer prices
increased less than expected in August, paring traders' outlook
that domestic inflation is accelerating.             
    "That weaker number certainly helped to give the euro,
sterling and the loonie a lift," said Dean Popplewell, vice
president of market analysis at Oanda.
    "I think the loonie from here will actually perform rather
well," Popplewell said. "The (U.S.) dollar bears are now
starting to re-emerge in this marketplace."  
    The loonie has been boosted this week by optimism that a
deal to renew the North American Free Trade Agreement would be
reached and a jump in the price of oil, one of Canada's major
    But U.S. oil        settled 2.5 percent lower on Thursday
and Canadian heavy crude prices traded at the biggest discount
to North American futures in nearly five years.
    At 3:26 p.m. (1926 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.2996 to the greenback, or
76.95 U.S. cents. The currency touched its strongest since Aug.
30 at C$1.2976.
    The modest gain for the loonie came as signs of movement in
the U.S.-China trade stand-off and a bumper interest rate hike
in emerging market trouble spot Turkey sent world shares higher.
    Canada exports many commodities and runs a current account
deficit, so its economy could be hurt if the global flow of
trade or capital slows.
    The country has its own trade feud with the United States
and is also in talks to revamp the North American Free Trade
    Canadian Prime Minister Justin Trudeau said he wanted a good
NAFTA deal as soon as possible, but did not answer directly when
asked if he agreed with Washington that Sept. 30 was the final
deadline for talks.                 
    Canadian government bond prices edged higher across the
yield curve, with the 10-year             gaining 6 Canadian
cents to yield 2.328 percent.
    On Wednesday, the 10-year yield touched its highest in more
than one month at 2.347 percent.
    New home prices in Canada increased by 0.1 percent in July
from the prior month, matching the forecast of analysts. The
year-over-year increase slowed to 0.5 percent from 0.8 percent
in June.             

 (Reporting by Fergal Smith
Editing by Susan Thomas and Lisa Shumaker)