Canada's dollar fell versus theU.S. currency early on Friday after domestic inflation data didnot alter expectations that the Bank of Canada can keep itspledge to leave interest rates steady through mid-2010. 

The Canadian unit dropped as low as C$1.0402 to the U.S.dollar, or 96.14 U.S. cents, compared with C$1.0334 to the U.S.dollar, or 96.77 U.S. cents, just before the data.

 It's in part the CPI data but I think there is a broadermove going on here, said Stewart Hall, market strategist atHSBC Canada.

I'd be leery to lay it all at the feet of CPIbecause it looks like you're starting to get a U.S. dollar movethat's maybe related more to (corporate) earnings than CPI. 

The U.S. dollar was broadly stronger on Friday as Bank ofAmerica earnings fell short of expectations, sparkingprofit-taking in a range of currencies that earlier hitmulti-month highs against the greenback, as well as equitiesand commodities.

[USD/] By 8:05 a.m. (1205 GMT), the Canadian unit was at C$1.0383to the U.S. dollar, or 96.31 U.S. cents, down from C$1.0345 tothe U.S. dollar, or 96.67 U.S. cents, at Thursday's close. Early on Thursday, the currency had rallied to C$1.0207 tothe U.S. dollar, or 97.97 U.S. cents, which was its highestlevel since July 2008. 

The Canadian CPI data showed consumer prices dropped inSeptember from a year earlier due largely to tumbling gasolineprices in a mixed report that ruled out any specter of eitherprolonged deflation or unruly price pressures.

The CPI is expected to permit the Bank of Canada to holdthe line on interest rates next Tuesday and repeat aconditional pledge that rates will stay unchanged at 0.25percent through mid-2010.