CANADA FX DEBT-C$ adds to 2-month high, on course to rise 7.2 pct in 2017

    * Canadian dollar at C$1.2552, or 79.67 U.S. cents
    * Loonie touches its strongest since Oct. 20 at C$1.2526
    * Bond prices mixed across the yield curve

    TORONTO, Dec 29 (Reuters) - The Canadian dollar strengthened
to a two-month high against its U.S. counterpart on Friday, as
the greenback broadly fell and oil prices rose, with the loonie
on track to post its biggest yearly advance since 2009.
    The loonie has climbed 7.2 percent in 2017, its second
straight year of gains as Canada's economy recovered following a
plunge in the price of oil, one of the country's major exports.
    U.S. oil prices have rebounded to reach their highest since
mid-2015 as an unexpected fall in American output and a fall in
commercial crude inventories stoked buying.             
    U.S. crude        prices were up 0.48 percent at $60.13 a
    The U.S. dollar        slipped to its lowest in more than
three months against a basket of major currencies as the euro
and sterling climbed.             
    At 9:43 a.m. ET (1443 GMT), the Canadian dollar          was
trading at C$1.2552 to the greenback, or 79.67 U.S. cents, up
0.1 percent.
    On Thursday the currency broke out from a roughly 1.26 to
1.29 range it has been trading at over the past two months. On
Friday, it touched its strongest since Oct. 20 at C$1.2526.
    Data before the Christmas break, which showed an
acceleration in inflation and strength in wholesale trade and
retail sales, has helped underpin the loonie by increasing
prospects for further interest rate hikes from the Bank of
    Money markets expect Canada's central bank to raise rates
three times in 2018, which is more than is expected from the
U.S. Federal Reserve.                     
    The Bank of Canada raised interest rates in July, and then
again in September, for the first time in seven years. Its
benchmark interest rate sits at 1 percent.
    Canadian government bond prices were mixed across the yield
curve, with the two-year            up 2 Canadian cents to yield
1.685 percent and the 10-year             falling 4 Canadian
cents to yield 2.036 percent.

 (Reporting by Fergal Smith; Editing by Susan Thomas)