(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Loonie notches its strongest since Feb. 5 at 1.3108 * Price of U.S. oil increases 2.7% * Canada's 10-year yield touches a 2-week high at 1.499% By Fergal Smith TORONTO, June 26 (Reuters) - The Canadian dollar strengthened to a near five-month high against its U.S. counterpart on Wednesday as oil prices climbed and investors adjusted to the prospect of interest rate cuts by the Federal Reserve. The U.S. central bank signaled last Wednesday that it could ease interest rates as early as July due to growing risks to the U.S. economy, especially related to the trade war between Washington and Beijing. "I think the market is still reeling from last week's big Fed move," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. The Bank of Canada has also worried about trade conflicts. Money markets see about a 50% chance of a rate cut this year by the central bank, but that is much less easing than expected from the Fed. Adding to support for the loonie, the price of oil, one of Canada's major exports, was buoyed by U.S. government data that showed a larger-than-expected drawdown in crude stocks. U.S. crude oil futures settled 2.7% higher at $59.38 a barrel. At 2:44 p.m. (1844 GMT), the Canadian dollar was trading 0.4% higher at 1.3118 to the greenback, or 76.23 U.S. cents. The currency touched its strongest intraday level since Feb. 5 at 1.3108. The loonie rose despite Beijing on Tuesday halting beef and pork imports from Canada, citing falsified paperwork. Unknown actors are using bogus certificates to smuggle Canadian meat into China, Trade Minister Jim Carr said on Wednesday. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 9.5 Canadian cents to yield 1.454% and the 10-year declined 59 Canadian cents to yield 1.497%. The 10-year yield touched its highest intraday since June 12 at 1.499%. Canadian gross domestic product data for April is due for release on Friday. (Reporting by Fergal Smith Editing by Nick Zieminski and Susan Thomas)
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