CANADA FX DEBT-C$ notches 3-week high, supported by recent oil rally

    * Canadian dollar at C$1.2636, or 79.14 U.S. cents
    * Loonie touches its strongest since Dec. 5 at C$1.2627
    * Bond prices mixed across a flatter yield curve

    TORONTO, Dec 27 (Reuters) - The Canadian dollar strengthened
to a three-week high against its U.S. counterpart on Wednesday,
supported by a recent rally in oil prices.
    The U.S. dollar        lost 0.3 percent against a basket of
currencies and slid against the euro in thin holiday trading.
    The price of U.S. crude oil        was down 0.43 percent at
$59.71 a barrel after reaching a near two-and-a-half year high
in the previous session on supply outages in Libya and the North
    Oil is one of Canada's major exports.         
    At 10:04 a.m. EST (1504 GMT), the Canadian dollar          
traded at C$1.2636 to the greenback, or 79.14 U.S. cents, up 0.4
    The currency's weakest level of the session was C$1.2694,
while it touched its strongest since Dec. 5 at C$1.2627.
    Data before the Christmas break showed that domestic
economic growth stalled in October. It offset inflation, trade
and retail sales data from earlier last week that had made a
January interest rate hike by the Bank of Canada a 50-50 call.
    Still, Canada's economy faces a number of potential
headwinds, including renegotiation of the North American Free
Trade Agreement. Officials from Canada, the United States and
Mexico will meet in Montreal Jan. 23-28 for talks on thorny
subjects such as autos, dispute settlement and an expiry clause.
    Speculators have added to bullish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed on Friday. As of Dec. 19, net
long positions had increased to 45,901 contracts from 41,960 a
week earlier.             
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 0.5 Canadian cent
to yield 1.665 percent and the benchmark 10-year            
rising 16 Canadian cents to yield 2.006 percent.
    On Friday, the 2-year yield reached a 6-1/2-year high at
1.709 percent.

 (Reporting by Fergal Smith; Editing by Jeffrey Benkoe)