CANADA FX DEBT-C$ rallies to two-month high as Fed turns more dovish

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.9 percent against the greenback
    * Loonie touches its strongest since Nov. 8 at 1.3119
    * Currency on track to rise 3.8 percent in January
    * Price of U.S. oil up 1.7 percent
    * Canadian bond prices rise across much of steeper yield

    By Fergal Smith
    TORONTO, Jan 30 (Reuters) - The Canadian dollar climbed to
its highest level in more than two months against its broadly
weaker U.S. counterpart on Wednesday, as oil prices rose and the
Federal Reserve said it would be patient in lifting borrowing
costs further this year.
    The U.S. dollar        fell against a basket of major
currencies after the Fed held interest rates steady, as
expected, and struck a cautious tone in its outlook for the
economy and future interest rate increases.             
    "The Canadian dollar is flying high on the basis of looser
global monetary conditions," said Karl Schamotta, director of
global markets strategy at Cambridge Global Payments. "We are
seeing a sustained risk rally around the world on the basis of a
more dovish Fed than had been previously expected."
    Global stocks          rose about 1.2 percent, building on
gains since the start of the year.
    Canada is running a current account deficit and exports many
commodities, including oil, so its economy could benefit from a
pickup in the global flow of capital.
    The price of oil was boosted by U.S. government data that
showed signs of tightening supply, as investors remained
concerned about supply disruptions following U.S. sanctions on
Venezuela's oil industry. U.S. crude oil futures settled 1.7
percent higher at $54.23 a barrel.             
    At 4:07 p.m. (2107 GMT), the Canadian dollar          was
trading 0.9 percent higher at 1.3148 to the greenback, or 76.06
U.S. cents. The currency touched its strongest level intraday
since Nov. 8 at 1.3119.
    The loonie has climbed 3.8 percent for the month so far, the
best performance of G10 currencies. It declined 7.8 percent in
    Gains for the loonie came as the United States and China
opened a pivotal round of high-level talks aimed at digging out
from their months-long trade war.                      
    Canadian government bond prices were higher across much of a
steeper yield curve in sympathy with U.S. Treasuries. The
two-year            rose 5.5 Canadian cents to yield 1.823
percent and the 10-year             gained 15 Canadian cents to
yield 1.923 percent.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 2 basis points to a spread of 69.5 basis
points in favor of the U.S. bond.
    Canada's gross domestic product data for November is due on
Thursday. Analysts expect the data to reveal a contraction in
the economy.

 (Reporting by Fergal Smith; Editing by Peter Cooney)