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CANADA FX DEBT-C$ keeps pace with greenback as trade optimism rises

Fergal Smith

(Adds dealer quotes and details throughout; updates prices)

* Canadian dollar falls 0.1 percent for the week

* Price of U.S. oil rises 3.3 percent

* Canada's annual inflation rate rises to 2 percent

* Bond prices fall across the yield curve

* 10-year yield touches its highest in one month

TORONTO, Jan 18 (Reuters) - The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Friday, supported by hopes of a possible end to the U.S.-China trade war and domestic data showing that inflation rose more than expected in December. Wall Street and oil prices moved higher after a Bloomberg report said China sought to raise its annual goods imports from the United States by a combined value of more than $1 trillion in order to reduce its trade surplus to zero by 2024.

Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade.

U.S. crude oil futures settled 3.3 percent higher at

$53.80 a barrel. Oil has rebounded about 27 percent since slumping to an 18-month low in December. The recent rally in stocks and oil prices could encourage the Bank of Canada to consider an interest rate hike sooner than the market anticipates, said Michael Goshko, corporate risk manager at Western Union Business Solutions. "That expectation is beginning to build back into the market after the sharp equity selloff had a large contractionary effect on bond yields and on monetary policy expectations for 2019," Goshko said. Chances of a Bank of Canada interest rate hike by April climbed to 25 percent from less than 20 percent the day before, data from the overnight index swaps market showed. Increased chances of an interest rate hike over the coming months came as data showed that Canada's annual inflation rate climbed in December, matching the Bank of Canada's 2 percent target. Still, economists said that the central bank would pay more attention to underlying price pressures, which were stable and below target. At 3:46 p.m. PM EST (2046 GMT), the Canadian dollar was trading nearly unchanged at 1.3277 to the greenback, or 75.32 U.S. cents. It was the only G10 currency not to lose

ground against the U.S. dollar .

For the week, the loonie declined 0.1 percent. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 6.5 Canadian cents to yield 1.944 percent and the 10-year declined 29 Canadian cents to yield 2.032 percent. The 10-year yield touched its highest intraday since Dec. 18 at 2.049 percent.

(Reporting by Fergal Smith Editing by Susan Thomas)