* Canadian dollar rises 0.2% against the greenback * Price of U.S. oil increases 2% * Canadian labor productivity falls by 0.1% in fourth quarter * Canadian bond yields decline across the yield curve By Fergal Smith TORONTO, March 4 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rose but the gain was modest ahead of an expected interest rate cut by the Bank of Canada that could help offset the economic impact of the coronavirus outbreak. At 8:43 a.m. (1343 GMT), the Canadian dollar was trading 0.2% higher at 1.3365 to the greenback, or 74.82 U.S. cents. The currency traded in a range of 1.3345 to 1.3394. The price of oil, one of Canada's major exports, rose on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak. U.S. crude oil futures were up 2% at $48.14 a barrel. As the virus spreads, money markets see it as likely the Bank of Canada will cut its 1.75% benchmark interest rate by 50 basis points, which would match the size of the Federal Reserve's easing on Tuesday. It would be the first time the central bank cut by more than 25 basis points since March 2009, when the economy was in recession due to the global financial crisis. The rate decision is due at 10 a.m. (1500 GMT). "The virus is expected to take a greater toll on Canada's economy than the U.S.'s due to weaker commodity prices and less underlying strength," Sal Guatieri, a senior economist at BMO Capital Markets said in a note. "Lower rates are no vaccine, but they can partially treat the symptoms of the virus by supporting confidence and shoring up financial conditions," Guatieri said. Canada is prepared to act quickly to help companies hurt financially by the outbreak of the new coronavirus and would not need to wait for the next budget, Finance Minister Bill Morneau said on Tuesday. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 10-year was down 1.4 basis points at 0.950%, approaching the record low it hit in September 2019 at 0.904%. Canadian labor productivity fell by 0.1% in the fourth quarter, as both hours worked and business output were little changed, Statistics Canada said. Compared to the same quarter in 2019, productivity was up 0.5%. Canada's jobs report for February is due on Friday. (Reporting by Fergal Smith; Editing by David Gregorio)
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