* Loonie touches its strongest level since Nov. 6 at 1.3158 * Canada's trade deficit narrows to C$1.1 billion in October * Price of U.S. oil increases by 0.9% * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, Dec 5 (Reuters) - The Canadian dollar strengthened on Thursday to its highest in nearly a month against the greenback as data showed Canada's trade deficit narrowed and a Bank of Canada official expressed confidence in the economic outlook. Bank of Canada Deputy Governor Timothy said the domestic economy remains resilient thanks to a strong labor market and stable inflation. On Wednesday, the central bank held its overnight interest rate at 1.75% as expected and cited early signs the global economy was stabilizing. "Right now they (the Bank of Canada) seem to be okay with where the economy is," said Bipan Rai, executive director and North America Head, FX Strategy. "It implies that the market shouldn't be pricing in a rate cut in January too aggressively." Chances of an interest rate cut in January have fallen to less than 10% from 20% before Wednesday's rate decision, data from the overnight index swaps market showed. Currency analysts polled by Reuters said the Canadian dollar will add to this year's gains over the coming 12 months as a potential easing of global economic risk reduces pressure on the Bank of Canada to support Canada's commodity-linked economy. The price of oil, one of Canada's major exports, rose on expectations OPEC and allied oil producers will deepen output cuts in an effort to prop up prices and prevent a glut next year. U.S. crude oil futures were up 0.9% at $58.93 a barrel. At 11:45 a.m. (1645 GMT), the Canadian dollar was trading 0.2% higher at 1.3178 to the greenback, or 75.88 U.S. cents. The currency, which notched on Wednesday its biggest gain in three months, touched its strongest intraday level since Nov. 6 at 1.3158. The loonie has been the top-performing G10 currency this year, rising 3.5% against the greenback. Canada posted a slightly narrower trade deficit in October of C$1.1 billion as both exports and imports climbed, Statistics Canada said. Exports rose by 0.8% to C$49.9 billion, while imports were up by 0.5%. In separate data, the Ivey Purchasing Managers Index (PMI) rose in November to a three-month high at 60.0 from 48.2 in October. Canada's jobs report for November is due on Friday. Canadian government bond prices were lower across a steeper yield curve, with the 10-year falling 58 Canadian cents to yield 1.607%. The 10-year yield touched its highest intraday level since Nov. 12 at 1.624%. (Reporting by Fergal Smith; Editing by David Gregorio)
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