CANADA FX DEBT-C$ trims earlier gains as the greenback rallies on Fed minutes

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    * Canadian dollar rises 0.2% against the greenback
    * Canada's annual inflation rate held steady in July at 2%
    * U.S. oil prices fall by 0.8%
    * Bond prices move lower across the yield curve

    By Levent Uslu
    TORONTO, Aug 21 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday, recovering from a
two-month low it hit the previous day after
stronger-than-expected domestic inflation data, but earlier
gains were capped as the greenback rallied broadly.
    The U.S. dollar gained against a basket of currencies after
minutes from the Federal Reserve's July meeting showed that
policymakers were united in wanting to avoid the appearance of
being on the path to further rate cuts. 
    Canada's annual inflation rate held steady in July at 2% as
lower costs for services were offset by higher prices for
durable goods. Analysts had expected the annual rate to fall to
1.7% from 2% in June.            
    "The Canadian dollar and other major currencies are selling
off in response to a lowering of odds of further monetary easing
from the Federal Reserve," said Karl Schamotta, director of
global markets strategy at Cambridge Global Payments. But "the
inflation data this morning is underpinning the rally that we've
    The Canadian dollar          was trading 0.2% higher at
1.3289 to the greenback, or 75.25 U.S. cents, at 3:12 p.m. (1912
GMT). The currency, which on Tuesday touched its weakest
intraday level since June 19, was trading in a range of 1.3254
to 1.3324.
    Oil futures gave up earlier gains as increases in refined
product inventories and lingering worries about the global
economy offset U.S. government data showing a drawdown in
domestic crude stocks.             
    U.S. crude oil futures        settled 0.8% lower at $55.68 a
    Canada's retail sales data is due on Friday, with a Reuters
poll forecasting a 0.1% decrease, which could help guide
expectations about the Bank of Canada's interest rate decision.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 10 Canadian cents to
yield 1.395% and the 10-year             falling 53 Canadian
cents to yield 1.213%.

 (Reporting by Levent Uslu; Editing by Nichola Saminather and
Peter Cooney)