CANADA FX DEBT-C$ rises to one-week high on inflation data

   * C$ ends firmer at C$0.9565, or $1.0455

 * Bonds mostly lower across curve
 (Updates details and comments)

 TORONTO, April 19 (Reuters) - The Canadian dollar powered
to a one-week high against the U.S. dollar on Tuesday after
data showed Canada's annual inflation rate last month jumped to
its highest level since September 2008, putting more pressure
on the Bank of Canada to raise interest rates.

 On a year-over-year basis, the inflation rate in March shot
up to 3.3 percent from 2.2 percent in February, well above
market expectations, and above the Bank of Canada's target
range of 1 percent to 3 percent. The core rate remained tame,
however, but was still higher than market predictions.
[ID:nN19160402]

 "We had a very strong move initially, and from there the
market died a bit of a slow death this afternoon," said Steve
Butler, director of foreign exchange trading at Scotia
Capital.

 "The question is -- and this is probably why we didn't see
further gains from the initial jolt after the CPI -- does that
really change the Bank of Canada?" he said, adding that it was
unlikely the inflation number brought a May interest rate hike
back into play.

 The Canadian dollar CAD=D4 finished at C$0.9565 to the
U.S. dollar, or $1.0455, well above Monday's North American
finish of C$0.9642, or $1.0371.

 Underlying some of the currency's strength was a rebound in
oil prices, following Monday's correction. Oil is a key
Canadian export and movements in the price often influence the
commodity-linked Canadian dollar. [O/R]

 "More than anything, (yesterday) was a big cleansing of
some positions, so the market's getting back that momentum,"
Butler said.

 "I'm not really sure what exactly the catalyst is going to
be, but I do think it's just a matter of time before we see
Canada crack that C$0.95 cent level...The bottom line is the
fundamentals in Canada are still great."

 Canadian bond prices were mostly lower across the curve as
market players priced in an increased probability of higher
rates at every Bank of Canada policy-announcement date from
July to December.

 "Inflationary pressure has begun to enter Canada and this
will significantly change the market's expectation of what the
Bank of Canada will do in terms of interest rates," said
Camilla Sutton, chief currency strategist, at Scotia Capital.

 A poll of primary dealers conducted on Tuesday found that
eight out of the 12 primary dealers believed the central bank
will resume raising interest rates in July, up from seven in a
poll taken before the Bank of Canada held rates steady earlier
this month. [CA/POLL] [ID:nN19150176]

 The two-year bond CA2YT=RR, which is especially sensitive
to the bank's policy moves, was down 14 Canadian cents to yield
1.770 percent, while the 10-year bond CA10YT=RR lost 23
Canadian cents to yield 3.264 percent.
 (Editing by Peter Galloway)