CANADA FX DEBT-C$ makes slight gain against weakening US$

(Adds strategist comment, details; updates prices)
    * Canadian dollar settles at C$1.3564, or 73.72 U.S. cents
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Dec 9 (Reuters) - The Canadian dollar made slight
gains on Wednesday after two days of sharp losses against the
U.S. dollar, as investors continued to digest crude oil's
decline to 2009 lows and jostled for position ahead of expected
U.S. monetary tightening.
    The Canadian dollar ended the day trading at
C$1.3564 to the greenback, or 73.72 U.S. cents, slightly
stronger than the Bank of Canada's official close of C$1.3587,
or 73.60 U.S. cents.
    "The spike higher has almost been too fast, and we're likely
to see some consolidative price action I think and a little bit
of softness in the U.S. dollar too," said Scott Smith, senior
market analyst at Cambridge Global Payments in Toronto. 
    "The Canadian dollar has been at the mercy of oil for the
last few trading sessions," he added. "That's been the main
driver and likely will continue to be the driver until next week
as we head into the Fed announcement." 
    The greenback lost ground against a string of major
currencies as invested exited long U.S. dollar positions ahead
of the U.S. Federal Reserve meeting next week, when the central
bank is widely expected to hike rates for the first time in
almost a decade. 
    Oil prices fell for a fourth day as the market ignored an
unexpected drawdown in U.S. crude stockpiles to focus on a build
in distillates, including diesel, which came at twice the level
    The currency's strongest level of the session was C$1.3517,
while its weakest level was C$1.3620.
    Against the euro, the Canadian dollar weakened to C$1.4952,
its weakest level in 10 weeks.    
    The Canadian dollar hit an 11-year low against the greenback
on Tuesday, at C$1.3623, as a slump in crude oil prices to 2009
levels raised the prospect that Canada's central bank might have
to take further accommodative measures.    
    Bank of Canada Governor Stephen Poloz said on Tuesday that
rates could be pushed into negative territory if warranted, but
the overall tone of the speech was not as dovish as some had
expected following the plunge in crude oil prices, according to
a research note from RBC Capital Markets.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 4.5 Canadian
cents to yield 0.543 percent and the benchmark 10-year
 adding 15 Canadian cents to yield 1.488 percent.

 (Reporting by Alastair Sharp; Editing by Meredith Mazzilli and
Leslie Adler)