* Canadian dollar falls 0.8% against the greenback
* Touches its weakest since Nov. 24 at 1.3702
* Bank of Canada keeps its policy rate at 5%
* Canada-U.S. 2-year spread hits a 13-month wide
TORONTO, April 10 (Reuters) - The Canadian dollar weakened to a 4-1/2-month low against its U.S. counterpart on Wednesday as the combination of hot U.S. inflation data and a more dovish Bank of Canada led to a diverging outlook for U.S. and Canadian interest rates.
The loonie was trading 0.8% lower at 1.3680 to the U.S. dollar, or 73.10 U.S. cents, after touching its weakest intraday level since Nov. 24 at 1.3702.
The Canadian central bank kept its key interest rate unchanged at a near 23-year high of 5% but its governor, Tiff Macklem, said a cut in June was possible if a recent cooling trend in inflation is sustained.
Still, money markets dialed back expectations for a June rate cut to roughly 50% from 80% before the release of U.S. data showing consumer prices rising more than expected to 3.5% in the 12 months through March.
Canada's latest inflation report showed consumer prices easing to an annual rate of 2.8%, its slowest pace since June.
"Set against a more inflationary U.S. economy that shouldn't see the Fed cut before September, the BoC's dovish stance should let rate differentials to widen further moving forward," said Simon Harvey, head of FX analysis for Monex Europe and Monex Canada.
The U.S. dollar rose across the board after the U.S. inflation data pushed out the expected timing of a first rate cut by the Federal Reserve to September from June.
Canadian government bond yields rose sharply across the curve, tracking moves in U.S. Treasuries.
The 2-year was up 16.5 basis points at 4.356%, while the gap between it and the U.S. equivalent traded about 2 basis points wider to 61.5 basis points in favor of the U.S. note. That was the biggest gap since March 2023. (Reporting by Fergal Smith; Editing by Richard Chang)
