CANADA FX DEBT-C$ strengthens to 8-week high as oil prices climb

    * Canadian dollar at C$1.2982, or 77.03 U.S. cents
    * Loonie touches its strongest since June 14 at C$1.2963
    * Bond prices lower across flatter yield curve
    * 2-year yield reaches its highest in nearly 10 years

    TORONTO, Aug 7 (Reuters) - The Canadian dollar strengthened
to a nearly eight-week high against its U.S. counterpart on
Tuesday as oil prices rose and the greenback broadly fell.
    The price of oil, one of Canada's major exports, was boosted
by revived U.S. sanctions against major crude exporter Iran that
could tighten global supply. U.S. crude        prices were up
0.8 percent at $69.53 a barrel.                 
     The U.S. dollar        fell against a basket of its peers
as expectations grew that the greenback's recent rally on the
back of escalating trade tensions may be coming to an end.
    Canada runs a current account deficit, so its economy could
be hurt if the flow of trade or capital slows. The country is in
talks with the United States and Mexico to revamp the North
American Free Trade Agreement.
    Mexico's economy minister Ildefonso Guajardo said on Monday
the country has put forward a proposal to update the NAFTA trade
pact's contentious rules of origin, and in turn was studying the
U.S. position.             
    At 9:18 a.m. EDT (1318 GMT), the Canadian dollar         
was trading 0.2 percent higher at C$1.2982 to the greenback, or
77.03 U.S. cents.
    The currency, which touched its strongest since June 14 at
C$1.2963, has been boosted in recent days by data showing
stronger-than-expected growth in Canada's economy in May and a
record high for the country's exports in June. Canada's jobs
data for July is due on Friday.
    Speculators have cut bearish bets on the Canadian dollar for
the third straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed on Friday. As
of July 31, net short positions had fallen to 31,569 contracts
from 44,511 a week earlier.
    Canadian government bond prices were lower across a flatter
yield curve. The two-year was down 4.5 Canadian cents to yield
2.121 percent, its highest since October 2008, and the 10-year
            declined 8 Canadian cents to yield 2.363 percent.
    Canada's bond market was closed on Monday for a civic

 (Reporting by Fergal Smith)