CANADA FX DEBT-C$ strengthens in thin trading, logs overall 2016 gain

* Canadian dollar at C$1.3427 or 74.48 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Dec 30 (Reuters) - The Canadian dollar strengthened
against a weaker greenback on Friday in thin pre-holiday market
trading, and capped off an overall gain for 2016.
    The loonie saw an annual gain for the first time since 2012,
firming nearly 3 percent for this year. The dollar index,
which measures the U.S. dollar against a basket of six major
rivals, gained about 3.7 percent for the year.
    Overseas, a short-lived surge in the euro dominated foreign
exchange markets on Friday, with a lack of liquidity and
automated short-covering in euro exacerbating moves.
    The Canadian dollar finished trading at C$1.3427 to
the U.S. dollar, or 74.48 U.S. cents, stronger than the Bank of
Canada's official close of C$1.3508, or 74.03 U.S. cents.
    "A lot of it was about month-end, year-end flows, and
position squaring ahead of the new year," said David Bradley,
director of foreign exchange trading at Scotiabank.
    The currency traded between C$1.3401 and C$1.3505, touching
its strongest level since before Christmas.
    The price of oil, a key Canadian export, was lower on
Friday, but notched its biggest annual gain since 2009 after
OPEC and other major producers agreed to output cuts. U.S. crude
 prices were up 0.06 percent to $53.80 a barrel, while
Brent crude lost 0.18 percent to $56.75. 
    The Canadian dollar, which outperformed its key currency
counterparts, was trading in line with market expectations for
the end of 2016.
    "Overall, the market is looking for U.S. dollar strength for
the first half of 2017, followed by perhaps some Canadian dollar
strength into the latter part of 2017," said Jack Spitz,
managing director of foreign exchange at National Bank
Financial, pointing to expectations the Federal Reserve will
hike interest rates in 2017, in contrast to forecasts for the
Bank of Canada and elsewhere.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 2.5
Canadian cents to yield 0.746 percent and the benchmark 10-year
 rising 3 Canadian cents to yield 1.714 percent.
    The Canada-U.S. two-year bond spread was -45.2 basis points,
while the 10-year spread was -73.2 basis points.

 (Reporting by Solarina Ho; Editing by Chris Reese)