CANADA FX DEBT-C$ strengthens to a 7-week high as oil rallies

(Adds analyst quotes and details, updates prices)
    * Canadian dollar ends at C$1.3191, or 75.81 U.S. cents
    * Loonie touches its strongest since Oct. 20 at C$1.3184
    * Bond prices lower across steeper yield curve

    By Fergal Smith
    TORONTO, Dec 8 (Reuters) - The Canadian dollar strengthened
to a seven-week high against its U.S. counterpart on Thursday,
as higher oil prices offset broader gains for the greenback
after the European Central Bank's monetary policy decisions.
    Gains for the loonie came despite the Bank of Canada on
Wednesday pointing to a "significant" amount of slack in the
Canadian economy as it held interest rates steady. 
    "Right now, this is not a market that is very bearish on
Canada ... even though Canada is still mired with great
difficulties and long-term prospects look rather dim," said
Jimmy Jean, senior economist at Desjardins.
    Optimism that U.S. economic stimulus will boost Canada's
exports has offset the threat of protectionism, with the market
"not properly integrating the negatives for Canada," Jean said.
    Donald Trump's U.S. presidential election win has triggered
uncertainty about the outlook for the North American Free Trade
Agreement, which economists say will discourage investment.
    The Canadian dollar ended at C$1.3191 to the
greenback, or 75.81 U.S. cents, stronger than Wednesday's close
of C$1.3237, or 75.55 U.S. cents.
    The currency's weakest level of the session was C$1.3251,
while it touched its strongest since Oct. 20 at C$1.3184.
    Higher prices for oil, one of Canada's major exports, have
helped support the loonie after last week's output cut agreement
by members of the Organization of the Petroleum Exporting
    U.S. crude oil futures settled up $1.07 at $50.84 a
barrel on growing optimism that non-OPEC producers might also
agree to cut output. 
    The U.S. dollar rose against a basket of major
currencies, including the euro, as the ECB extended its asset
purchase programme at a reduced level and introduced measures
allowing it to buy more short-dated bonds. 
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries and German
government bonds.
    The two-year fell 3 Canadian cents to yield 0.719
percent and the benchmark 10-year declined 58
Canadian cents to yield 1.662 percent.
    Canada's housing market showed some signs of softening in
November as new construction starts fell, but separate data
showed prices rose in October and permits for future building
jumped, suggesting the market could have strength in reserve.

 (Reporting by Fergal Smith; Editing by Tom Brown)