CANADA FX DEBT-C$ outpaces greenback, makes new 7-week high as oil rises

* Canadian dollar at C$1.3175, or 75.90 U.S. cents
    * Loonie touches its strongest since Oct. 20 at C$1.3161
    * Bond prices lower across a steeper yield curve

    TORONTO, Dec 9 (Reuters) - The Canadian dollar strengthened
to a fresh seven-week high against its U.S. counterpart on
Friday, with the risk-sensitive commodity-linked currency
outpacing broader gains for the greenback as oil and stocks
    The loonie is on track to rise for the second straight week
despite the Bank of Canada on Wednesday pointing to
"significant" slack in the Canadian economy as it held interest
rates steady. 
    Higher prices for oil, one of Canada's major exports, have
helped support the Canadian dollar after last week's output cut
agreement by members of the Organization of the Petroleum
Exporting Countries.
    U.S. crude prices were up 0.92 percent at $51.31 a
barrel on hopes that non-OPEC producers meeting in Vienna would
also agree to cut output. 
    World stocks held near 16-month highs, set for a strong
weekly gain. That follows the European Central Bank's decision
on Thursday to extend its stimulus program. 
    At 9:07 a.m. EST (1407 GMT), the Canadian dollar 
was trading at C$1.3175 to the greenback, or 75.90 U.S. cents,
stronger than Thursday's close of C$1.3191, or 75.81 U.S. cents.
    The currency's weakest level of the session was C$1.3213,
while it touched its strongest since Oct. 20 at C$1.3161.
    The U.S. dollar gained ground against a basket of
major currencies. Still, a rise in Federal Reserve interest
rates next week seems fully priced-in to markets, and it may
take a more bullish signal on further rises next year from Fed
chair Janet Yellen to provoke more gains. 
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries.
    The two-year price dipped 1 Canadian cent to
yield 0.725 percent and the benchmark 10-year 
declined 20 Canadian cents to yield 1.681 percent.
    Last week, the 10-year yield touched its highest in more
than one year at 1.712 percent as investors bet that the
policies of U.S. President-elect Donald Trump will lead to
higher inflation.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)