CANADA FX DEBT-Canadian dollar pares gains on US tariff caution

By Fergal Smith

TORONTO, Jan 15 (Reuters) - The Canadian dollar strengthened for a third straight day against its U.S. counterpart on Wednesday, but the move was limited as trader caution about expected U.S. trade tariffs offset cooler-than-expected U.S. core inflation data.

The loonie CAD= was trading 0.1% higher at 1.4335 to the U.S. dollar, or 69.76 U.S. cents, after earlier touching its strongest level since Jan. 7 at 1.4303.

Growth in the U.S. core consumer price index, excluding the volatile food and energy components, slowed to 3.2% in December from 3.3% in November, raising bets on the Federal Reserve cutting interest rates in the coming months.

Wall Street rallied and U.S. Treasury yields fell, while the U.S. dollar .DXY lost ground against a basket of major currencies but the decline for the greenback began to peter out.

"There is very much still an underlying bid to the U.S. dollar," said Michael Goshko, senior market analyst at Convera Canada ULC. "Until we get clarity on the tariff situation, currency traders are happy to remain very, very long of dollars across the board."

Michigan Governor Gretchen Whitmer warned that potential 25% tariffs on imports from Mexico and Canada suggested by President-elect Donald Trump could harm the U.S. auto sector, increase vehicle prices and benefit China.

Domestic economic data showed that home sales fell 5.8% in December from November, but were still up 10% in the fourth quarter as the Bank of Canada slashed interest rates.

The price of oil, one of Canada's major exports, jumped 2.8% to $79.64 a barrel on a large draw in U.S. crude stockpiles and potential supply disruptions from new U.S. sanctions on Russia.

Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year CA10YT=RR was down 11.4 basis points at 3.429%, after earlier touching its highest level since July 5 at 3.571%.

(Reporting by Fergal Smith; Editing by Kirsten Donovan)

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