CANADA FX DEBT-C$ posts a 3-week high; pares gains on tame inflation

* Canadian dollar at C$1.3579, or 73.64 U.S. cents

* Loonie hits strongest since April 27 at C$1.3554

* Bond prices lower across the yield curve

TORONTO, May 19 (Reuters) - The Canadian dollar strengthened on Friday to a three-week high against its broadly weaker U.S. counterpart, supported by higher oil prices, but some gains were pared after domestic data showed core inflation remained muted. Canada's annual inflation rate held steady at 1.6 percent in April, missing economists' forecasts for 1.7 percent, as higher energy prices offset a decline in food costs for the seventh month in a row, data from Statistics Canada showed. "You have CPI with the core measures decelerating a touch. That is something that will give the Bank of Canada all the cover they need to stay on the sidelines," said Andrew Kelvin, senior rates strategist at TD Securities. In other domestic data, retail sales rose a stronger-than-expected 0.7 percent in March, driven by increased purchases at new and used cars dealers, as well as electronics and appliance stores. Prices of oil, one of Canada's major exports, were heading for a second week of gains on expectations big crude exporters will extend output cuts to curb a persistent glut in inventories.

U.S. crude prices were up 1.18 percent at $49.93 a


The U.S. dollar fell to a fresh six-month low against

a basket of major currencies, having given up almost all the gains made since Donald Trump, now surrounded by political worries, was elected U.S. president last year.

At 9:20 a.m. ET (1320 GMT), the Canadian dollar was

trading at C$1.3579 to the greenback, or 73.64 U.S. cents, up 0.2 percent. The currency's weakest level of the session was C$1.3611, while it touched its strongest since April 27 at C$1.3554. The loonie had hit a 14-month low at C$1.3793 earlier in May, pressured in part by a more uncertain trade outlook with the United States. On Thursday, the Trump administration set the clock ticking toward a mid-August start of renegotiations of the North American Free Trade Agreement. Also, Canada suggested it could scrap plans to buy Boeing Co fighter jets if the United States backed Boeing's claims

that Canadian plane maker Bombardier Inc dumped

jetliners in the U.S. market Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. Stocks on Wall Street were poised to open higher, reducing demand for safe-haven assets such as bonds.

The 10-year fell 18 Canadian cents to yield

1.464 percent. It had touched on Thursday a six-month low at 1.417 percent.

(Editing by Bernadette Baum)