CANADA FX DEBT-C$ hits five-week high on oil and Fed expectations

* Canadian dollar at C$1.2696, or 78.76 U.S. cents
    * Bond prices higher across maturity curve
    * Loonie touches its strongest level since May 3

 (Adds details and quotes, updates prices)
    TORONTO/OTTAWA, June 8 (Reuters) - The Canadian dollar
strengthened to a five-week high against the greenback on
Wednesday as the price of oil rose further and expectations
dwindled that the Federal Reserve will move soon to hike
interest rates again.
    Oil hit a high for the year after supply disruptions in
Nigeria and strong Chinese demand data. U.S. crude prices
settled up 87 cents at $51.23 a barrel. 
    A weaker U.S. dollar added to gains for the loonie as the
U.S. currency hit a five-week trough against a basket of major
currencies. Last week's poor U.S. jobs report and recent
comments from Fed Chair Janet Yellen have reduced bets of an
imminent Fed hike, marking a reversal from a few weeks ago when
traders were pricing in greater odds of a hike as early as June.
    "A lot of that expectation was built in and that has now
evaporated," said Rahim Madhavji, president at "It's really put a lot of uncertainty back
in the market and that doesn't bode well for the U.S. dollar."
    The Canadian dollar ended the North American
trading session at C$1.2696 to the greenback, or 78.76 U.S.
cents, stronger than Tuesday's close of C$1.2771, or 78.30 U.S.
    The loonie has climbed for four sessions in a row, putting
it up about 3 percent since the start of the month.
    Canadian Finance Minister Bill Morneau said the country's
expensive housing market is a "very real issue" for Canadians,
and the government was "looking at all evidence" as it considers
whether it needs to move again to tighten mortgage regulations.
    Canadian housing starts dipped last month as groundbreaking
slowed in British Columbia, data released on Wednesday showed,
which could ease concern that the western province's property
market is overheating. 
    Canadian employment data for May will be released at the end
of the week. The report will come after a massive wildfire last
month cut production in Alberta's oil sands region.
    The Bank of Canada has said it expects damage from the
wildfire to shave 1.25 percentage points off economic growth in
the second quarter, which could put the quarter on pace for a
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 1.5
Canadian cents to yield 0.521 percent, and the benchmark 10-year
 rising 20 Canadian cents to yield 1.199 percent.

 (Reporting by Fergal Smith and Leah Schnurr; Editing by Leslie