Canadian dollar pares gains as price pressures ease in June

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as stock markets calmed globally, but gains were capped by data showing national inflation rose less than expected in June.

Global equities regained some poise as a storm in Chinese stocks showed signs of easing and investors awaited a Federal Reserve interest rate decision.

Canada's annual inflation rate in June dipped to 3.1% from 3.6% in May, held back by price increases in June last year, data from Statistics Canada showed.

Still, the Bank of Canada's pledge to let the economy run hot could be tested, with more price increases expected as businesses shuttered during the COVID-19 pandemic reopen and consumers dip into record savings.

The Canadian dollar was trading 0.2% higher at 1.2580 to the greenback, or 79.49 U.S. cents, after trading in a range of 1.2560 to 1.2604.

The price of oil, one of Canada's major exports, rose ahead of an industry report expected to show U.S. crude inventories fell more than expected, bringing the focus back to a tight supply and demand balance rather than rising coronavirus infections.

U.S. crude prices were up 0.5% at $72.04 a barrel.

Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year rose 2.2 basis points to 1.192%.

(Reporting by Fergal Smith; Editing by Tomasz Janowski)