CANADA FX DEBT-Loonie little changed, pares earlier drop as oil price rallies

    * Canadian dollar near flat against the greenback
    * Price of U.S. oil increases 1.8%
    * Canadian factory sales fall by 0.6% in April 
    * Canadian bond prices rise across flatter yield curve

    TORONTO, June 18 (Reuters) - The Canadian dollar was little
changed on Tuesday, paring earlier losses after slipping to a
two-week low against the greenback, as a rally in oil prices
offset domestic data showing an unexpected drop in April
manufacturing sales.
    Canadian factory sales fell by 0.6% in April from March as
motor vehicle sales were held back by temporary assembly plant
shutdowns, Statistics Canada said. Analysts had forecast a 0.4%
    The price of oil, one of Canada's major exports, rose as
Middle East tensions offset signs that global economic growth is
being hurt by the trade dispute between the United States and
China. U.S. crude oil futures        were up 1.8% at $52.85 a
    Canada and China have also had trade frictions, including
the blocking by China of Canadian canola seed imports. On
Tuesday, China's customs agency said it would block pork imports
from a Canadian company after a batch of the firm's pork was
found to contain the banned feed additive ractopamine.
    At 9:40 a.m. (1340 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3406 to the greenback, or 74.59
U.S. cents.
    The currency traded in a narrow range of 1.3402 to 1.3433.
Still, 1.3433 was its weakest intraday level since June 4.    
    The U.S. dollar        rose against a basket of major
currencies after ECB chief Mario Draghi said the bank will
provide more monetary stimulus if inflation doesn't pick up,
pressuring the euro.             
    Meanwhile, the U.S. Federal Reserve is expected to leave
borrowing costs unchanged at an interest rate decision on
Wednesday but possibly lay the groundwork for a rate cut later
this year.                 
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 4 Canadian cents to yield
1.379% and the 10-year             rising 43 Canadian cents to
yield 1.409%.
    The 10-year yield hit its lowest intraday since June 2017 at
1.383%, while the gap between the 2- and 10-year yields narrowed
by 2.3 basis points to a spread of 3 basis points.
    Canada's inflation report for May is due on Friday.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)