CANADA FX DEBT-Canadian dollar dips after short-lived boost from inflation data

By Fergal Smith

TORONTO, March 18 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday, pulling back from an earlier 12-day high, as equity markets fell and investors looked past hotter-than-expected Canadian inflation data.

The loonie CAD= was trading 0.1% lower at 1.4305 per U.S. dollar, or 69.91 U.S. cents, after touching its strongest intraday level since March 6 at 1.4271.

Canada's annual inflation rate rose to 2.6% in February, surpassing expectations for a rate of 2.2%, as a sales tax break that ended in the middle of the month pushed prices higher amid an already broad-based increase.

"The Canadian dollar jumped and then gave it right back," said Adam Button, chief currency analyst at ForexLive. "I think the market is a little bit more concerned about growth right now."

Investors see a 38% chance of a Bank of Canada interest rate cut at its next policy decision on April 16, slightly less than before the data. 0#BOCWATCH

Wall Street's main indexes were lower on worries about the economic impact of U.S. tariff policies ahead of a monetary policy decision from the Federal Reserve.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the signal that equities send about the economic outlook.

The price of oil CLc1, one of Canada's major exports, settled 1% lower at $66.90 a barrel as Ukraine peace talks offset worries about Mideast instability.

Canadian government bond yields were mixed across the curve. The 10-year CA10YT=RR was up less than half a basis point at 3.017% after pulling back from an earlier high of 3.110%.