CANADA FX DEBT-C$ is able to 'hang tough' as BoC optimism offsets oil drop

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.1% against the greenback
    * Canada's current account deficit widens in first quarter 
    * Price of U.S. oil slumps 3.8%
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, May 30 (Reuters) - The Canadian dollar rose against
the greenback on Thursday, recovering from a near five-month low
a day earlier, as the Bank of Canada's forecast for the economy
to pick up helped soften the blow for the currency from a drop
in oil prices.    
    Oil prices fell to their lowest in two months on a
smaller-than-expected decline in U.S. crude inventories and
fears of a global economic slowdown due to the U.S.-China trade
war. U.S. crude oil futures        settled 3.8% lower at $56.59
a barrel.                 
    "It's impressive, the ability of the Canadian dollar to hang
tough with oil down so much," said Adam Button, chief currency
analyst at ForexLive.
    The loonie has not weakened because of the market's
perception that the U.S. Federal Reserve will cut interest rates
before the Bank of Canada, Button said.
    Bank of Canada Senior Deputy Governor Carolyn Wilkins
repeated the central bank's message from the day before that
there was increasing evidence that the economic slowdown was
temporary but that the bank was worried about trade frictions.
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of trade.
    Canada's current account deficit widened to C$17.35 billion
in the first quarter from a revised C$16.62 billion deficit in
the fourth quarter, on a higher deficit on trade goods and
services, Statistics Canada said.             
    At 3:52 p.m. (1952 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3505 to the greenback, or 74.05 U.S.
cents. The currency, which hit on Wednesday its weakest since
Jan. 3 at 1.3547, traded in a range of 1.3485 to 1.3521.    
    U.S. Vice President Mike Pence said he was pushing to get
the U.S. Congress to ratify the new North American trade
agreement this summer after both Canada and Mexico signaled they
are ready to start the approval process.                 
    Canadian government bond prices rose across a flatter yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 1 Canadian cent to yield 1.526% and the 10-year            
climbed 22 Canadian cents to yield 1.556%.
    The gap between the 2- and 10-year yields narrowed by 1.8
basis points to a spread of 3 basis points in favor of the
longer-dated bond, its smallest gap since August 2007.

 (Reporting by Fergal Smith; editing by Grant McCool)