CANADA FX DEBT-C$ pares its recent decline as oil prices rally

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar rises 0.4 percent against the greenback
    * Price of U.S. oil rises 2.5 percent
    * Canada manufacturing PMI falls to nearly 2-year low
    * Canadian bond prices mixed across flatter yield curve
    * Canada's 10-year yield hits its lowest in more than one

    By Fergal Smith
    TORONTO, Jan 2 (Reuters) - The Canadian dollar strengthened
against its broadly stronger U.S. counterpart on Wednesday,
paring some of its 2018 decline as higher oil prices offset
domestic data showing a slowdown in manufacturing growth.
    The price of oil, one of Canada's major exports, climbed in
choppy trading despite evidence of softer growth in Asia and
Europe that could hurt demand for the commodity. U.S. crude oil
futures        settled 2.5 percent higher at $46.54 a barrel
    The "bounce in oil prices" has helped boost the Canadian
dollar, said Erik Nelson, a currency strategist at Wells Fargo.
"CAD is a stand-out."
    At 4:06 p.m. (2106 GMT), the Canadian dollar          was
trading 0.4 percent higher at 1.3584 to the greenback, or 73.62
U.S. cents, the second-best performance among G10 currencies.
The currency touched its strongest level since last Thursday at
    Last year, the loonie posted its worst performance since
2015 as expectations dwindled for additional rate hikes in 2019
from the Bank of Canada. The central bank has worried that a
plunge in oil prices since October could hurt Canada's economy.
    Data showed that Canada's manufacturing sector expanded in
December at the slowest pace in nearly two years as production
growth faltered and export orders stagnated. The IHS Markit
Canada Manufacturing Purchasing Managers' index fell to a
seasonally adjusted 53.6 last month, its lowest since January
2017, from 54.9 in November.                      
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 0.5 Canadian cent
to yield 1.865 percent and the 10-year             rising 33
Canadian cents to yield 1.926 percent.
    The 10-year yield hit its lowest intraday since December
2017 at 1.871 percent.
    The country's employment report for December is due on

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter