CANADA FX DEBT-Canadian dollar dips as inflation data supports BoC's patient stance

By Fergal Smith

TORONTO, March 17 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Wednesday, pulling back from an earlier three-year high as oil fell and tamer-than-expected domestic inflation data supported the Bank of Canada's patient approach to raising interest rates.

Canada's annual inflation rate rose to 1.1% in February from 1.0% in January but below analysts estimates of 1.3%. nL1N2LF14V

"The CPI report is consistent with steady, accommodative policy from the BoC for an extended period," said Ryan Brecht, a senior economist at Action Economics.

The central bank has signaled that its benchmark interest rate will be left at a record low of 0.25% until 2023, but money markets have been pricing in an earlier move and strategists expect the bank to cut its bond purchases next month. nL1N2LA30S

The Canadian dollar CAD= was trading 0.2% lower at 1.2473 to the greenback, or 80.17 U.S. cents, having touched its strongest intraday level since February 2018 at 1.2434.

The price of oil, one of Canada's major exports, slipped for a fourth day as concerns about weaker demand in Europe outweighed an industry report that showed U.S. crude inventories unexpectedly fell last week. U.S. crude CLc1 prices were down 0.7% at $64.34 a barrel. nL1N2LF08O

Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries ahead of a Federal Reserve interest rate decision, with investors expecting the Fed to forecast the U.S. economy will grow in 2021 at the fastest rate in decades. nL1N2L82OT

The 10-year yield CA10YT=RR touched its highest since January 2020 at 1.633% before dipping to 1.616%, up 4.8 basis points on the day.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))