C$ touches 10-day low; decline capped as oil prices rise

* Canadian dollar weakens 0.1% against the greenback

* Touches its weakest since Aug. 8 at 1.2946.

* Price of U.S. oil rises 2.2%

* Canadian bond yields ease across flatter curve

TORONTO, Aug 18 (Reuters) - The Canadian dollar weakened to a 10-day low against its broadly stronger U.S. counterpart on Thursday as investors continued to assess minutes from the Federal Reserve's latest policy meeting, but the decline was limited as oil prices moved higher.

The loonie CAD= was down 0.1% at 1.2920 to the greenback, or 77.40 U.S. cents, after touching its weakest since Aug. 8 at 1.2946.

The U.S. dollar .DXY touched a three-week high against a basket of major currencies after minutes from the Fed's July meeting pointed to U.S. interest rates staying higher for longer to bring down inflation.

The price of oil, one of Canada's major exports, rose as robust U.S. fuel consumption data and expected falls in Russian supply later in the year offset concerns that a possible recession in developed economies could undercut demand.

U.S. crude CLc1 prices were up 2.2% at $90.04 a barrel.

Producer prices in Canada fell by 2.1% in July from June but were up 11.9% on an annual basis, data from Statistics Canada showed.

Canadian inflation is not likely to return to the central bank's 2% target until 2024 after possibly peaking in June, as less volatile items like wages and rent displace energy as key sources of price pressure, analysts say.

Canadian retail sales data for June, due on Friday, could offer more clues on the outlook for the domestic economy.

Canadian government bond yields eased across a flatter curve. The 10-year CA10YT=RR was down 5.4 basis points at 2.806%, after touching on Wednesday its highest intraday rate in more than three weeks at 2.890%.
Reporting by Fergal Smith; Editing by Alison Williams

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