Canadian dollar strengthens 0.3 against the greenback
Touches its strongest since Aug. 4 at 1.3337
Canada39;s annual inflation rate holds steady at 3.1
CanadaU.S. 2year spread narrows by 2.6 basis points

TORONTO, Dec 19 Reuters The Canadian dollar strengthened to a fourandahalfmonth high against its U.S. counterpart on Tuesday as investors reduced bets on an early start to Bank of Canada interest rate cuts after domestic data showed inflation holding steady in November.

The loonie was trading 0.3 higher at 1.3355 to the greenback, or 74.88 U.S. cents, after touching its strongest intraday level since Aug. 4 at 1.3337.

Canada39;s annual inflation rate was 3.1 in November, matching October39;s pace, as slower growth in food prices and cheaper cellular services and fuel oil were offset by an acceleration in prices of travel tours. Analysts had forecast inflation to ease to 2.9.

Today39;s print just shows that there39;s still that twosided risk, said Michael Greenberg, SVP and portfolio manager, Franklin Templeton Investment Solutions. Inflation is still a concern of course but the Bank also doesn39;t want to slow the economy too much and cause undue hardship on people.

Money markets see a roughly 40 chance the BoC will begin cutting interest rates in March, down from 50 before the data. The central bank39;s benchmark interest rate is at a 22year high of 5.

Adding to support for the loonie, the price of oil, one of Canada39;s major exports, was up 0.5 at 72.82 a…