CANADA FX DEBT-C$ strengthens to nearly 3-week high as greenback slides

    * Canadian dollar at C$1.3599, or 73.53 U.S. cents
    * Bond prices little changed across the yield curve

    TORONTO, May 16 (Reuters) - The Canadian dollar strengthened
on Tuesday to a nearly 3-week high against its U.S. counterpart
as oil prices rose and the greenback lost ground against a
basket of major currencies.
    The U.S. dollar        was pressured by allegations that
U.S. President Donald Trump disclosed highly classified
information to Russia's foreign minister about a planned Islamic
State operation.                         
    U.S. crude        prices were up 0.84 percent to $49.26 a
barrel after top producers Saudi Arabia, Russia and Kuwait
supported prolonging supply cuts until the end of March 2018 in
an effort to drain a global glut.             
    The Canadian dollar's historically close link to oil, one of
Canada's major exports, has become stronger in recent weeks. The
three-month rolling correlation between the loonie and oil was
at nearly its highest since September at 0.74, indicating that
the currency and the commodity move mostly in the same
    At 9:12 a.m. ET (1312 GMT), the Canadian dollar          was
trading at C$1.3599 to the greenback, or 73.53 U.S. cents, up
0.2 percent, according to Reuters data.
    The currency's weakest level of the session was C$1.3659,
while it touched its strongest since April 27 at $1.3596.
    The loonie has recovered from a recent 14-month low at
C$1.3793. It had been pressured not long ago by depressed oil
prices, a more uncertain trade outlook with the United States
and investor worries about how the troubles of alternative
lender Home Capital Group          could affect the country's
real estate market.
    Home Capital may need to draw down more from a high-interest
credit facility provided by the Healthcare of Ontario Pension
Plan in order to meet a debt repayment due next week, director
Alan Hibben told Reuters on Monday.             
    Canadian government bond prices were little changed across
the yield curve, with the 10-year             rising 1 Canadian
cent to yield 1.593 percent. The 10-year yield fell 1 basis
points further below its U.S. equivalent to a spread of -75.4
basis points.
    Lending to small Canadian businesses was little changed in
March compared to the month before, though borrowing by
medium-sized companies jumped as they benefited from a recovery
in the energy sector, data showed.             

 (Reporting by Fergal Smith; Editing by Nick Zieminski)