* Weaker greenback opens door to gain in Canadian dollar
* Higher oil prices lend support to Canadian dollar's rise
* Bonds hold steady ahead of Fed interest rate decision
By Frank Pingue
TORONTO, Dec 15 (Reuters) - The Canadian dollar shot higher on Monday in a move largely explained by a surge in oil prices and a weaker U.S. dollar, which has started to relinquish gains made this autumn on its safe-haven status.
Bond prices were mostly flat across the curve as the lack of any Canadian economic data left dealers avoiding huge commitments until learning of the U.S. Federal Reserve's interest rate decision on Tuesday.
At 9:50 a.m. (1450 GMT), the Canadian unit was at C$1.2290 to the U.S. dollar, or 81.37 U.S. cents, up 1.8 percent from C$1.2512 to the U.S. dollar, or 79.92 U.S. cents, at Friday's North American session close.
The Canadian currency's rise came as the U.S. dollar fell versus a basket of currencies. The fall came as investor demand to unload risky positions and repatriate funds back into the greenback looked like it has started to dry up.
After rallying on a string of weak economic data and a dark global economic outlook, the U.S. dollar has fallen back due to a more upbeat tone on global equities markets, which has helped to ease extreme risk aversion.
"We're generally seeing the U.S. dollar broadly on the defensive. It's weakened to multi-month lows against a number of currencies and the Canadian dollar is being partly swept up by that," said Doug Porter, deputy chief economist at BMO Capital Markets.
"Also we've seen seen renewed strength in energy prices to start the week on growing talk of some serious cuts by OPEC."
Oil prices were given a boost ahead of a meeting of members of the Organization of the Petroleum Exporting Countries this week. OPEC members are largely in agreement on the need to cut output.
That helped oil prices rise above $48 a barrel, comfortably above the four-year low they fell to earlier this month but still well below the record high of more than $147 in July. Canada's currency often follows the direction of oil prices since Canada is a key producer and exporter of oil.
Canadian bond prices were mostly flat alongside the bigger U.S. Treasury market ahead of Tuesday's Federal Reserve policy meeting, which is expected to lower interest rates.
The Fed is widely expected to cut rates by 50 basis points or more from 1 percent. That would follow the Bank of Canada's 75 basis point cut in its key rate to 1.50 percent last week, bringing the rate to its lowest level in 50 years.
With no key Canadian data due until later this week, Porter said bond prices could be influenced largely by the bigger U.S. Treasury market.
Porter also said Canada's October retail sales data due out Thursday could draw more attention from dealers than Friday's consumer prices report for November, which is expected to show another drop in prices.
"There's no question about which way the CPI is headed over the next couple months but there still is some question over just how weak, or not weak, the underlying Canadian domestic economy is."
The two-year bond was down 1 Canadian cent at C$102.43 to yield 1.487 percent. The 10-year was up 6 Canadian cents at C$109.51 to yield 3.082 percent.
The yield spread between the two-year and 10-year bond was at 159 basis points, up from 158 basis points at the previous close.
The 30-year bond was off 3 Canadian cents at C$121.50 to yield 3.763 percent. In the United States, the 30-year Treasury yielded 3.045 percent. (Editing by Peter Galloway)