CANADA FX DEBT-C$ notches 3-week high, underpinned by firm domestic data

 (Adds dealer quotes and details; updates prices)
    * Canadian dollar at C$1.2646, or 79.08 U.S. cents
    * Loonie touches strongest level since Dec. 5 at C$1.2627
    * Bond prices mixed across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 27 (Reuters) - The Canadian dollar scored a
three-week high against its U.S. counterpart on Wednesday,
supported by last week's firm domestic data and the recent rally
in oil prices.
    At 4 p.m. ET (2100 GMT), the Canadian dollar          was
trading at C$1.2646 to the greenback, or 79.08 U.S. cents, up
0.3 percent. It touched its strongest level since at Dec. 5, at
    "A lot of it is just thin holiday markets and a continuation
of the move after the strong data that we saw last week," said
David Bradley, director of foreign exchange trading at
    Domestic inflation, wholesale trade and retail sales data
before the Christmas break boosted bets of a Bank of Canada
interest rate hike in January to a 50-50 call, although
expectations for a January hike were tempered by data on Friday
showing Canada's economic growth stalled in October.           
    Some money managers still expect the loonie to strengthen
from here, but USD-CAD needs to close below C$1.26 to confirm
that it is breaking out of the roughly C$1.26 to C$1.29 range
that has held over the past couple of months, Bradley said.
    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.             
    Even so, Canada's economy faces a number of potential
headwinds, including tighter mortgage rules that come into
effect in January and 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.
    The U.S. dollar fell on Wednesday to a 3-1/2-week low
against a basket of currencies as traders bet more major central
banks would begin reducing monetary stimulus in 2018 due to
faster economic growth.             
    The price of U.S. crude oil        settled 0.6 percent lower
at $59.64 a barrel, a day after reaching a near
two-and-a-half-year high on supply outages in Libya and the
North Sea.
    Oil is one of Canada's major exports.
    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 10-year             rising 37
Canadian cents to yield 1.98 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 and
Leslie Adler)