CANADA FX DEBT-C$ recovers from 3-month low as oil rallies

 (Adds strategist quote, details throughout; updates prices)
    * Canadian dollar at C$1.2827, or 77.96 U.S. cents
    * Loonie touches its weakest since July 12 at C$1.2916
    * Oil rallies 2.4 percent
    * Bond prices move higher across a flatter yield curve

    By Fergal Smith
    TORONTO, Oct 27 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Friday, recovering from an
earlier three-month low, as oil rose and the market weighed
prospects of Federal Reserve Governor Jerome Powell being picked
to head the U.S. central bank.
    U.S. crude oil futures        jumped to the highest since
early March, settling 2.4 percent higher at $53.90 a barrel, as
the world's top producers indicated support for extending a deal
to rein in output.             
    Oil is one of Canada's major exports.
    The U.S. dollar        pared some of its earlier gains
versus a basket of currencies following a report that President
Donald Trump is leaning toward Powell as his pick for Fed Chair.
Powell is seen as less hawkish than one of the other leading
    Still, the Canadian dollar has been the weakest performer of
the G10 currencies in the seven weeks since the Bank of Canada
last raised interest rates, and some strategists predict more
declines in value after the central bank on Wednesday dialed
back expectations for more rate increases this year.
    "We do think that the loonie will remain on the defensive,
at least for now," said Bipan Rai, senior macro strategist at
CIBC Capital Markets. "Positioning and sentiment still remain
overly bullish on the Canadian dollar."
    Bullish bets on the loonie held near their highest in about
five years, data from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed. As of Oct. 24,
Canadian dollar net long positions had dipped to 72,332
contracts from 75,086 a week earlier.
    At 4 p.m. EDT (2100 GMT), the Canadian dollar          was
trading at C$1.2827 to the greenback, or 77.96 U.S. cents, up
0.1 percent.
    It touched its weakest intraday since July 12, when the Bank
of Canada raised rates for the first time in nearly seven years,
 at C$1.2916. For the week, it declined 1.6 percent.
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 6 Canadian cents to
yield 1.427 percent and the 10-year             rising 37
Canadian cents to yield 1.989 percent.
    The gap between Canada's two-year yield and its U.S.
counterpart widened by 0.7 of a basis point to a spread of -16.9
basis points, its widest since July 11.

 (Reporting by Fergal Smith; Editing by W Simon and Chris Reese)