CANADA FX DEBT-C$ climbs amid optimism on U.S.-China trade negotiations

    * Canadian dollar rises 0.3 percent against the greenback
    * Price of U.S. oil rises nearly 2 percent
    * Canada's industry capacity use fell to 82.6 percent in Q3
    * Canadian bond prices trade lower across the yield curve

    TORONTO, Dec 12 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday, boosted by higher oil
prices and investor optimism over trade negotiations between the
United States and China.
    U.S. President Donald Trump, in an interview with Reuters,
said that trade talks with Beijing were underway by telephone,
with more meetings likely between U.S. and Chinese officials.
    He also said he would intervene in the Justice Department's
case against a top executive at China's Huawei Technologies
         if it would serve national security interests or help
close a trade deal with China.             
    The executive was granted bail by a Canadian court on
Tuesday, 10 days after her arrest in Vancouver at the request of
U.S. authorities sparked a diplomatic dispute.             
    Canada exports many commodities, including oil, and runs a
current account deficit, so its economy stands to benefit if the
outlook improves for the global flow of trade and capital.    
    Stocks rose as Trump's comments fueled optimism over trade
negotiations between the United States and China, while the
price of oil was supported by an industry report that showed a
drop in U.S. crude inventories, a cut in Libyan exports and an
OPEC-led deal to trim output.                         
    U.S. crude oil futures        were up nearly 2 percent at
$52.67 a barrel.
    At 9:06 a.m. (1406 GMT), the Canadian dollar          was
trading 0.3 percent higher at 1.3346 to the greenback, or 74.93
U.S. cents. The currency traded in a range of 1.3340 to 1.3398.
    Last Thursday, the loonie touched its weakest level in
nearly 18 months at 1.3445 to the U.S. dollar after Bank of
Canada Governor Stephen Poloz said the economy was less strong 
than forecast.              
    Canadian industry ran at 82.6 percent of capacity in the
third quarter, below a downwardly revised 84.1 percent in the
second quarter, Statistics Canada said on Wednesday.
    Separately, the Teranet-National Bank Composite House Price
Index showed that Canadian home prices fell 0.3 percent in
November from October, the second straight month of decline.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
fell 4 Canadian cents to yield 2.059 percent and the 10-year
            declined 21 Canadian cents to yield 2.105 percent.  

 (Reporting by Fergal Smith; Editing by Steve Orlofsky)