CANADA FX DEBT-C$ outpaces greenback, makes new 7-week high as oil rises
* Canadian dollar at C$1.3175, or 75.90 U.S. cents * Loonie touches its strongest since Oct. 20 at C$1.3161 * Bond prices lower across a steeper yield curve TORONTO, Dec 9 (Reuters) - The Canadian dollar strengthened to a fresh seven-week high against its U.S. counterpart on Friday, with the risk-sensitive commodity-linked currency outpacing broader gains for the greenback as oil and stocks climbed. The loonie is on track to rise for the second straight week despite the Bank of Canada on Wednesday pointing to "significant" slack in the Canadian economy as it held interest rates steady. Higher prices for oil, one of Canada's major exports, have helped support the Canadian dollar after last week's output cut agreement by members of the Organization of the Petroleum Exporting Countries. U.S. crude prices were up 0.92 percent at $51.31 a barrel on hopes that non-OPEC producers meeting in Vienna would also agree to cut output. World stocks held near 16-month highs, set for a strong weekly gain. That follows the European Central Bank's decision on Thursday to extend its stimulus program. At 9:07 a.m. EST (1407 GMT), the Canadian dollar was trading at C$1.3175 to the greenback, or 75.90 U.S. cents, stronger than Thursday's close of C$1.3191, or 75.81 U.S. cents. The currency's weakest level of the session was C$1.3213, while it touched its strongest since Oct. 20 at C$1.3161. The U.S. dollar gained ground against a basket of major currencies. Still, a rise in Federal Reserve interest rates next week seems fully priced-in to markets, and it may take a more bullish signal on further rises next year from Fed chair Janet Yellen to provoke more gains. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year price dipped 1 Canadian cent to yield 0.725 percent and the benchmark 10-year declined 20 Canadian cents to yield 1.681 percent. Last week, the 10-year yield touched its highest in more than one year at 1.712 percent as investors bet that the policies of U.S. President-elect Donald Trump will lead to higher inflation. (Reporting by Fergal Smith; Editing by Nick Zieminski)
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