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* Canadian dollar strengthens vs greenback as oil higher
* Bond prices largely lower; stock markets sell off
TORONTO, Jan 5 (Reuters) - The Canadian dollar strengthened against the U.S. currency on Monday morning, helped by a rise in crude oil prices on tension in the Middle East.
Bonds were lower across curve as Toronto's main stock index .GSPTSE moved well off early lows, after rising 2.7 percent on Friday.
Shortly after 10:30 a.m. (1530 GMT), the Canadian dollar was at C$1.2004 to the U.S. dollar, or 83.30 U.S. cents, up from Friday's close of C$1.2156 to the U.S. dollar, or 82.26 U.S. cents.
"(The Canadian dollar) traded a bit weaker overnight on general strength on the greenback due to optimism about the (U.S. President-elect Barack) Obama stimulus plan, although the loonie is receiving support from higher oil prices due to Mideast tensions," said Sal Guatieri, senior economist at BMO Capital Markets.
Oil was above $47 a barrel on the tension in the Middle East after Israel's invasion of Gaza but was see-sawing as the strength in the U.S. dollar weighed. [ID:nSP343684]
Guatieri said softness in U.S. economic numbers, including auto sales and construction spending data on Monday, could support the Canadian currency.
The market will focus on employment reports for December in both Canada and the United States later this week, he said.
The Canadian dollar fell around 20 percent in 2008, as plunging commodity prices in the second half of the year took their toll.
Government bond prices turned lower after early strength as stock markets fought back from early lows.
The two-year Canada bond fell 2 Canadian cents to C$102.98 to yield 1.158 percent, while the 10-year bond fell 20 Canadian cents to C$111.45 to yield 2.852 percent.
The yield spread between the two-year and 10-year bond was 166 basis points, versus 167.5 at the previous close.
The 30-year bond fell 60 Canadian cents to C$125.35 to yield 3.572 percent. In the United States, the 30-year Treasury yielded 2.8812 percent. (Reporting by Jennifer Kwan; editing by Peter Galloway)