* Canadian dollar falls 0.4 percent against the greenback * Loonie on track to rise 0.8 percent for the week * Price of U.S. oil falls 1.3 percent * Canadian bond prices rise across the yield curve TORONTO, Jan 11 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as oil prices fell, but the loonie stayed on course to advance for a second straight week after the Bank of Canada said the challenges facing the economy were temporary. At 9:36 a.m. (1436 GMT), the Canadian dollar was trading 0.4 percent lower at 1.3262 to the greenback, or 75.40 U.S. cents. The currency, which on Wednesday touched its strongest intraday level in more than 5 weeks at 1.3180, traded in a range of 1.3183 to 1.3269. For the week, the loonie was up 0.8 percent. The Bank of Canada held interest rates steady as expected on Wednesday but said more increases would be necessary even though low oil prices and a weak housing market will harm the economy in the short term. U.S. crude oil futures were down 1.3 percent on Friday at $51.91 a barrel. Still, oil, which is one of Canada's major exports, has been boosted this week by hopes the United States and China may soon resolve their trade dispute. It has rebounded about 22 percent since slumping in December to an 18-month low. The U.S. dollar strengthened against a basket of major currencies as U.S. data showed that consumer prices fell for the first time in nine months in December amid a plunge in the cost of gasoline but underlying inflation pressures remained firm. Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, with the two-year price up 6.6 Canadian cents to yield 1.882 percent and the 10-year rising 33 Canadian cents to yield 1.947 percent. Canada is working with politicians and businesses in the United States to pressure President Donald Trump to scrap tariffs on its steel and aluminum, Prime Minister Justin Trudeau said on Thursday. (Reporting by Fergal Smith; editing by Jonathan Oatis)
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