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CANADA FX DEBT-Canadian dollar recovers as investors bet on Brexit deal

By Fergal Smith

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar near flat against the greenback * Canadian inflation holds steady at 1.9% in September * Price of U.S. oil increases 1% * Canadian bond prices rise across a steeper yield curve By Fergal Smith TORONTO, Oct 16 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Wednesday, clawing back its earlier decline as the potential for a last-minute Brexit deal weighed on the greenback. The U.S. dollar fell across the board as dismal U.S. retail sales data painted a gloomy picture of the economy and as sterling and the euro benefited from hopes that Britain and the European Union were on the verge of an amicable divorce deal. "It seems like we are getting closer and closer to a deal between the EU and the U.K.," said Bipan Rai, North America head, FX strategy, at CIBC Capital Markets. "You are seeing some of that positioning off-loaded across the board and that has put the (U.S.) dollar on the defensive, and several currencies have gained as a result." Canada is a major exporter of commodities, including oil, so its economy could benefit from reduced global trade uncertainty. Oil prices were supported by signs that OPEC and allied producers will continue to curb supplies in December. U.S. crude oil futures settled 1% higher at $53.36 a barrel. At 5 p.m. (2100 GMT), the Canadian dollar was trading nearly unchanged at 1.3197 to the greenback, or 75.77 U.S. cents. The currency, which notched a one-month high on Friday at 1.3171 after data showing a second straight month of blockbuster Canadian job gains, traded in a range of 1.3184 to 1.3243. Canada's annual inflation rate held steady at 1.9% in September, falling short of the 2.1% rate that analysts had expected, data on Wednesday from Statistics Canada showed. Still, the average of the Bank of Canada's three core measures edged up to 2.1% from 2.0%, cementing expectations for the central bank to leave its benchmark interest rate on hold at 1.75% later this month. Canadian government bond prices were higher across a steeper yield curve, with the two-year up 4 Canadian cents to yield 1.668% and the 10-year rising 14 Canadian cents to yield 1.548%. On Tuesday, the 10-year yield touched its highest level intraday in nearly one month at 1.577%. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Alistair Bell)