CANADA FX DEBT-C$ weakens with oil but set for 2nd straight weekly gain

    * 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
    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)