* C$ retrenches after briefly reaching session high
* Bonds mixed
* Canada inflation at 2-year high, prompts rate talk
* Markets jolted by Korean tensions, euro zone concerns
TORONTO, Nov 23 (Reuters) - Canada's dollar firmed briefly to a session high against the U.S. currency on Tuesday and short-term government bond yields were higher, after data showed the domestic inflation rate in October jumped to a two-year high.
Canada's annual inflation rate in October rose to a two-year high of 2.4 percent from 1.9 percent in September on higher prices for gasoline and energy, Statistics Canada said. The annual core inflation rate rose to 1.8 percent from 1.5 percent in September. [ID:nSCLNME67E]
The Canadian dollar rose as high as C$1.0162 to the U.S. dollar, or 98.41 U.S. cents, after the data, immediately spiking from around C$1.0190 to the U.S. dollar, or 98.14 U.S. cents.
However, by 8:00 a.m. (1300 GMT), the Canadian dollar CAD=D4 was at C$1.0204 to the U.S. dollar, or 98.00 U.S. cents, down from Monday's close at C$1.0175 to the U.S. dollar, or 98.28 U.S. cents.
"It's been helped out by the CPI data but it's lost that pop," said Sacha Tihanyi, currency strategist at Scotia Capital.
"It's still a very good data print for Canada. It's certainly higher than the Bank of Canada's average outlook for what's going to happen in Q4 for the price increases so it's constructive as far as that goes. But of course one data point does not make a trend."
Analysts differed on whether the data would prompt the Bank of Canada to raise interest rates sooner than expected, and the impact on the Canadian dollar was only fleeting as attention returned to external influences. [ID:nN23115741]
Market players were also monitoring rising tensions in the Korean peninsula after North Korea fired dozens of artillery shells at a South Korean island, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.
The incident addded to pressures already boiling in global financial markets from concerns that a rescue package for Ireland may not stop problems from spreading to other indebted euro zone countries. [MKTS/GLOB]
Short-dated Canadian government bond yields were mostly higher after the data, with the rate sensitive two-year yield CA2YT=RR rising to 1.627 percent from 1.576 percent just before the report.
Yields on long-dated maturities were lower, following the trend in U.S. Treasuries, as safe haven flows were ignited by news of Korea tensions. The 10-year bond CA10YT=RR yielded 3.066 percent.
(Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)
