CANADA FX DEBT-Canadian dollar holds near 8-month high after benign US inflation data

By Fergal Smith

TORONTO, June 11 (Reuters) - The Canadian dollar was barely changed against its U.S. counterpart on Wednesday as U.S. consumer prices rose less than expected in May and some investors doubted Canada's increased military spending would quickly stimulate its economy.

The loonie CAD= was trading nearly unchanged at 1.3667 per U.S. dollar, or 73.17 U.S. cents, after moving in a range of 1.3651 to 1.3690. Last Thursday, the currency touched nearly an eight-month high at 1.3632.

"Canada's plan to increase defence spending hasn't materially shifted the loonie's direction, Karl Schamotta, chief market strategist at Corpay, said in a note. "Major questions remain around just how fast the military will spend its newfound largesse."

On Monday, Canada vowed to hit in this fiscal year NATO's target to spend 2% of GDP on the military, five years earlier than promised.

The U.S. dollar .DXY fell against a basket of major currencies on Wednesday after the tamer-than-expected inflation data suggested the Federal Reserve could resume cutting interest rates by September.

Canadian data showed building permits fell 6.6% in April from March.

The price of oil, one of Canada's major exports, settled 4.9% higher at $68.15 a barrel after sources said the U.S. was preparing to evacuate its embassy in Iraq due to heightened security concerns in the Middle East.

Canadian bond yields edged lower across the curve as U.S. Treasury yields declined. The 10-year CA10YT=RR was down about half a basis point at 3.339%.