CANADA FX DEBT-Loonie firms on the day but sees worst year since 2008

* Canadian dollar at C$1.1601 or 86.20 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    OTTAWA, Dec 31 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Wednesday, finding some
respite on the last day of a tough 2014 in which it racked up
its worst performance in six years.
    The Canadian dollar started the year as many investors' top
short position as the market expected the Bank of Canada to
remain accommodative. 
    But after a selloff in the first three months, the loonie
managed to regain some ground into the summer, only to be
knocked lower again by the plunge in oil prices and a U.S.
Federal Reserve that was moving closer to raising interest
    The Canadian dollar was down more than 8 percent for the
year, its biggest decline since 2008, the start of the global
financial crisis.
    "It's definitely been a challenging one for the loonie and
is likely to continue into 2015," said Scott Smith, senior
market analyst at Cambridge Mercantile Group.
    At the top of investors' minds in 2015 will be expectations
that the Fed will lift rates before the Bank of Canada does,
which will spur the market to keep on favoring the greenback at
the expense of the loonie.
    The potential for another slide in oil prices is a big risk
for the currency as oil is a major export for Canada. Oil's
weakness continued on Wednesday with crude down $1.10 at
$53.02 a barrel.
    "The bet on the Canadian dollar is very much at this point
in time a forecast on what happens for crude pricing," said    
Jack Spitz, managing director of foreign exchange at National
Bank Financial.
    "If you're of the view that crude is effectively bottoming
around these levels in the $50s, there's reason to suggest that
the Canadian dollar has bottomed out as well." 
    Despite oil's drop on Wednesday, the Canadian dollar
 firmed, rising to a session high of C$1.1565 before
finishing at C$1.1601 to the greenback, or 86.20 U.S. cents,
according to the early official close from the Bank of Canada.
That was slightly stronger than Tuesday's C$1.1607, or 86.15
U.S. cents.
    Analysts said technical trading and year-end rebalancing in
light volume were behind the loonie's strength.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.009 percent and the benchmark 10-year
 up 19 Canadian cents to yield 1.791 percent.

 (Editing by Peter Galloway)