CANADA FX DEBT-C$ tracks oil higher; Bank of Canada rate decision due Wednesday

    * Canadian dollar at C$1.2374, or 80.81 U.S. cents
    * Bond prices higher across flatter yield curve
    * Bank of Canada interest rate decision due on Wednesday

    TORONTO, Sept 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday as oil prices rose,
while investors weighed prospects of a Bank of Canada interest
rate hike as early as this week.
    Prices of oil, one of Canada's major exports, climbed as the
gradual restart of refineries in the Gulf of Mexico that were
shut by Hurricane Harvey raised demand for crude.      
    U.S. crude        prices were up 2.16 percent at $48.31 a
    On Wednesday, the Bank of Canada is likely to announce it
will leave rates unchanged, a Reuters poll released on Friday
showed. The bank will probably wait until October to raise them,
according to the survey. 
    Still, the chances of a hike this week have climbed to more
than 40 percent, the overnight index swaps market indicated,
from around 20 percent before data on Thursday showing Canada's
economy expanded in the second quarter at its fastest pace in
nearly six years.            
    The central bank raised rates in July for the first time in
nearly seven years. Its policy rate stands at 0.75 percent.
    At 9:06 a.m. ET (1306 GMT), the Canadian dollar          was
trading at C$1.2374 to the greenback, or 80.81 U.S. cents, up
0.3 percent.
    The currency traded in a range of C$1.2368 to C$1.2416. It
posted on Friday a two-year high at C$1.2340. Canada's bond and
stock markets were closed on Monday for Labor Day.
    Speculators have increased bullish bets on the loonie, data
from the U.S. Commodity Futures Trading Commission and Reuters
calculations showed on Friday.              
    Canadian dollar net long positions have edged up to 53,167
contracts as of Aug. 29 from 51,099 a week earlier.
    Simmering geopolitical tensions put investors off adding big
bets before a European Central Bank meeting this week when
policymakers might voice some concerns about the single
currency's strength.             
    Analysts and South Korean policymakers believe North Korea
may test another weapon on or around Sept. 9, when it celebrates
its founding day.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries as tensions over
North Korea fed investor demand for safe-haven assets.
    The two-year            rose 0.5 Canadian cent to yield
1.338 percent, and the 10-year             climbed 44 Canadian
cents to yield 1.864 percent.
    Canada's trade data for July is due on Wednesday, while the
August employment report is awaited on Friday.         

 (Reporting by Fergal Smith; Editing by W Simon)