CANADA FX DEBT-C$ climbs to one-week high, supported by boost to investor sentiment

    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches its strongest since May 11 at 1.3905
    * Price of U.S. oil increases 2.8%
    * Canadian bond yields rise across a steeper curve

    By Fergal Smith
    TORONTO, May 19 (Reuters) - The Canadian dollar strengthened
to a one-week high against its U.S. counterpart on Tuesday as
oil prices rose and after investor sentiment was boosted the day
before by news of encouraging early-stage tests of a possible
COVID-19 vaccine.
    Canada runs a current account deficit and is a major
exporter of commodities, such as oil, so the loonie tends to be
sensitive to the global flow of trade and capital.
    "The Canadian dollar is retaining the gains on the USD made
yesterday amid the general pro-risk push in the markets,"
strategists at Scotiabank, including Shaun Osborne, said in a
    U.S. crude oil futures        climbed 2.8% to $32.70 a
barrel amid signs that producers are cutting output as promised,
while the U.S. dollar        lost ground against a basket of
major currencies as a Franco-German proposal for a coronavirus
recovery fund boosted the euro.                                 
    The Canadian dollar          was trading 0.2% higher at
1.3905 to the greenback, or 71.92 U.S. cents, its strongest
level since May 11.
    Canada's inflation report for April is due on Wednesday,
with economists expecting the consumer price index to show an
annual decline of 0.1%. Also on Wednesday, Bank of Canada Deputy
Governor Timothy Lane is due to speak.
    Since March, the central bank has slashed interest rates to
near zero and begun its first ever large-scale bond buying
    Canadian government bond yields jumped across a steeper
yield curve on Tuesday, playing catch-up after the Victoria Day
holiday the previous day. The 10-year yield             rose 10
basis points to 0.643%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)