* Canadian dollar at C$1.2338, or 81.05 U.S. cents
* Domestic wholesale trade rises 1.5 percent in July
* Bond prices dip across a flatter yield curve
By Fergal Smith
TORONTO, Sept 21 (Reuters) - The Canadian dollar edged lower on Thursday against its U.S. counterpart as oil prices dipped, but pared some losses after domestic data showed much stronger-than-expected growth in wholesale trade.
The 1.5 percent increase in July wholesale trade exceeded economists' forecasts for a decline of 0.9 percent and was the biggest increase since January. Stripping out the effects of price changes, volumes were even stronger, up 2.1 percent.
The strength of the data has boosted the outlook for growth in the economy for the month, offsetting soft manufacturing data, Nick Exarhos, an economist at CIBC Capital Markets, said in a research note.
Economists will turn to Canada's retail sales report, due on Friday, for further clues on prospects for July gross domestic product. The country's August inflation report is also due on Friday.
"It is a wait and see now ahead of CPI data out tomorrow," said Jeff Scott, senior corporate dealer at CanadianForex.
A jump in inflation could trigger in October another interest rate hike by the Bank of Canada, Scott added.
The central bank hiked rates earlier in September for the second time in three months.
Prices of oil, one of Canada's major exports, gave up some recent gains before a meeting of oil producers that could extend production limits aimed at clearing a glut. crude CLc1 prices settled 0.3 percent lower at $50.55 a barrel.
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2338 to the greenback, or 81.05 U.S. cents, down 0.1 percent.
The currency traded in a range of C$1.2320 to C$1.2368.
On Wednesday, the loonie hit a 2-week low at C$1.2390 after the Federal Reserve signaled that it expected to raise interest rates once more by year-end.
Mexico and Canada will survive current talks with the United States on trade relatively unscathed, according to a Reuters poll of economists. government bond prices dipped across a flatter yield curve, with the two-year CA2YT=RR down 2 Canadian cents to yield 1.592 percent and the 10-year CA10YT=RR falling 3 Canadian cents to yield 2.109 percent.
The 10-year yield hovered below a nearly three-year high of 2.119 percent reached earlier this week.
Still, global investors are warming up to Canadian bonds and their newly attractive yields, saying there is a limit to how much the Bank of Canada can diverge from its peers after its two interest rate hikes this year.