* Loonie posts a weekly decline of 0.2%
* Price of U.S. oil rises 1.1%
* Canadian bond yields ease across steeper curve
* 2-year yield hits an 8-month low
TORONTO, Jan 12 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Friday as oil gave back much of its earlier gains and ahead of domestic inflation data next week that could offer clues on the Bank of Canada policy outlook.
The loonie was trading nearly unchanged at 1.3395 to the greenback, or 74.65 U.S. cents, after moving in a range of 1.3344 to 1.3410.
"CAD has weakened during the North American session as WTI crude oil prices were unable to hold on to an outsized 4.4% gain from the overnight session," said George Davis, chief technical strategist at RBC Capital Markets.
The price of oil, one of Canada's major exports, pulled back from an earlier two-week high, which was made after air and sea strikes by the U.S. and Britain on Houthi targets in Yemen, but was still up 0.9% at the time of settlement at $72.68 a barrel.
For the week, the Canadian dollar was down 0.2%, its second straight weekly decline. It touched a four-week low on Thursday at 1.3442 after hotter-than-expected U.S. inflation data briefly checked expectations for the Federal Reserve to shift to interest rate cuts as soon as March.
Canada's inflation report for December is due on Tuesday. Economists expect inflation to climb to 3.3% from 3.1% in November.
Canadian government bond yields fell across a steeper curve, with the market tracking moves in U.S. Treasuries after U.S. producer prices data for December fell unexpectedly.
The 2-year was down 4.7 basis points at 3.791%, after earlier touching its lowest level since May 12 at 3.705%. (Reporting by Fergal Smith; Editing by Will Dunham)
