CANADA FX DEBT-C$ pushes to 2-month high as greenback broadly falls

    * Canadian dollar at C$1.2591, or 79.42 U.S. cents
    * Loonie touches strongest since Oct. 20 at C$1.2580
    * Bond prices lower across the yield curve
    * Canada-US 10-yr spread hits narrowest since Nov. 16

    TORONTO, Dec 28 (Reuters) - The Canadian dollar strengthened
to a two-month high against its U.S. counterpart on Wednesday,
as the greenback broadly fell and commodity markets held on to
recent gains.
    At 9:08 a.m. ET (1408 GMT), the Canadian dollar          was
trading at C$1.2591 to the greenback, or 79.42 U.S. cents, up
0.5 percent.
    The currency, which had been trading in range roughly
between 1.26 and 1.29 over the past two months, touched its
strongest since Oct. 20 at C$1.2580.
    The U.S. dollar        held near a one-month low against a
basket of major currencies as the latest jobless claims data
suggesting a firm labor market was offset by advance trade
balance figures that pointed a widening trade gap in November.
    Investors have also been weighing prospects for global
central banks to tighten monetary conditions, lessening the
divergence between the U.S. Federal Reserve's policy and the
rest of the world.             
    The Bank of Canada raised interest rates in July, and then
again in September, for the first time in seven years. Money
markets expect three further hikes in 2018, which is more than
is expected from the Fed.                     
    The price of oil, one of Canada's major exports, stood near
its highest in two and a half years, supported by strong data
from top importer China amid thin trading activity ahead of the
New Year weekend.             
    U.S. crude        prices were up 0.05 percent at $59.67 a
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
fell 3 Canadian cents to yield 1.679 percent and the benchmark
10-year             declined 30 Canadian cents to yield 2.016
    The gap between Canada's 10-year yield and its U.S.
counterpart narrowed by 2.3 basis points to a spread of -41.1.
basis points, its narrowest since Nov. 16.

 (Reporting by Fergal Smith; Editing by Frances Kerry)