CANADA FX DEBT-C$ notches eight-week high as stocks and oil climb

    * Canadian dollar at C$1.2551, or 79.67 U.S. cents
    * Loonie touches eight-week high at C$1.2528
    * Bond prices mixed across flatter yield curve

    By Fergal Smith
    TORONTO, April 17 (Reuters) - The Canadian dollar
strengthened to an eight-week high against its U.S. counterpart
on Tuesday as stocks and oil prices rose, while investors
digested stronger-than-expected domestic data ahead of a Bank of
Canada interest rate decision on Wednesday.
    U.S. stocks climbed on corporate earnings. Higher stock
prices tend to signal optimism about the global economic
outlook, which is important for Canada's commodity-linked
    The price of oil, one of Canada's major exports, was
supported by growing concern over the potential for supply
disruptions. U.S. crude oil futures        settled 0.5 percent
higher at $66.52 a barrel.             
    "We are seeing the oil story helping (the Canadian dollar)
more than the rates story is hurting at this stage," said Don
Mikolich, executive director, foreign exchange sales at CIBC
Capital Markets.
    Canada's yields fell further below their U.S. counterparts
on Wednesday, with the 2-year spread widening by 0.6 of a basis
point to a spread of -50.6 basis points.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.2551 to the greenback, or
79.67 U.S. cents. The currency touched its strongest level since
Feb. 19 at C$1.2528.         
    The loonie is on course to strengthen in April for the
eighth time in the last 10 years, a sequence strategists link to
seasonal vitality in stocks and energy products, rewarding
investors who trade on market patterns.                     
    Canadian factory sales grew by 1.9 percent in February from
January on higher sales in the transportation equipment
industry, Statistics Canada said. Analysts had forecast an
increase of 1.0 percent.             
    Money markets do not expect the Bank of Canada to raise
interest rates this week. But central bank optimism about the
country's economic outlook could raise expectations for a hike
as soon as next month.           
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 1 Canadian cent
to yield 1.884 percent and the 10-year             rising 24
Canadian cents to yield 2.243 percent.
    On Monday, the 10-year yield touched its highest level in
nearly four weeks at 2.292 percent.

 (Reporting by Fergal Smith; 
Editing by Sandra Maler)