* Canadian dollar strengthens 0.1% against the greenback
    * Loonie trades in a range of 1.2336 to 1.2368
    * Price of U.S. oil falls 1%
    * Canadian bond yields trade mixed across a steeper curve

    By Fergal Smith
    TORONTO, Oct 20 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Wednesday as domestic data
showing an 18-year high for inflation supported the market's
"hawkish outlook" for the Bank of Canada, offsetting a drop in
oil prices.
    Canada's annual inflation rate climbed to 4.4% in September,
driven by rising transportation, shelter and food prices, data
showed, putting the focus on the Bank of Canada ahead of a rate
decision next week.             
    Analysts say the BoC could further cut its bond buying
program next week, while money markets expect the first interest
rate hike to come in April, which is sooner than the central
bank has been guiding.           
    "Markets aren't much moved by the inflation print, with
investors already having priced in a very hawkish outlook for
the Bank of Canada prior to the release," Royce Mendes, a senior
economist at CIBC Capital Markets, said in a note.   
    The Canadian dollar        was trading 0.1% higher at 1.2345
to the greenback, or 81.00 U.S. cents, after trading in a range
of 1.2336 to 1.2368. On Tuesday, it touched its highest in over
three months at 1.2309.    
    The price of oil, one of Canada's major exports, fell after
the Chinese government stepped up efforts to tame record high
coal prices and ensure coal mines operate at full capacity. U.S.
crude        prices were down 1% at $82.14 a barrel.
            
    Separate data showed that Canadian home prices barely rose
in September from August as a recent slowdown in housing sales
weighed.             
    Canadian government bond yields were mixed across a steeper
curve, mirroring the move in U.S. Treasuries.
    The 10-year             rose half a basis point to 1.635%
but was holding below last week's peak of 1.683%, which was its
highest since January last year.

 (Reporting by Fergal Smith; 
Editing by Sandra Maler)