* Canadian dollar rises 0.4% against the greenback
* Canada's annual inflation rate held steady in July at 2.0%
* U.S. oil prices increase by 1.4%
* Bond prices move lower across the yield curve
By Levent Uslu
TORONTO, Aug 21 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday, rebounding from a two-month low it hit the previous session, after stronger-than-expected domestic inflation data.
Canada's annual inflation rate held steady in July at 2.0% as lower costs for services were offset by higher prices for durable goods. Analysts had expected the annual rate to fall to 1.7% from 2.0% in June. Canadian dollar CAD=D4 was trading 0.4% higher at 1.3263 to the greenback, or 75.40 U.S. cents, at 9:43 a.m. ET (1343 GMT). The currency, which on Tuesday touched its weakest intraday level since June 19, was trading in a range of 1.3254 to 1.3324.
The rise for the loonie came as the price of oil, one of Canada's major exports, rose on Wednesday after industry data showed a larger than expected drop in U.S. crude inventories, but gains were capped by lingering worries about a possible global recession. crude oil futures CLc1 were up 1.4% at $56.94 a barrel.
Canada's retail sales data is due on Friday, with a Reuters poll forecasting a 0.1% decrease, which could help guide expectations about the Bank of Canada's interest rate decision.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 7.5 Canadian cents to yield 1.382% and the 10-year CA10YT=RR falling 54 Canadian cents to yield 1.214%.