CANADA FX DEBT-C$ gains as investors bet on trade talks breakthrough

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.2 percent against the greenback
    * Price of U.S. oil advances 0.9 percent
    * Canadian bond prices dip across much of the yield curve

    By Fergal Smith
    TORONTO, Feb 19 (Reuters) - The Canadian dollar rallied to
its highest level in nearly a week against a broadly weaker
greenback on Tuesday, as oil prices rose and investors bet on a
breakthrough in trade talks between the United States and China.
    Optimism that a new round of talks between China and the
United States would help resolve their trade conflict triggered
selling of the safe-haven U.S. dollar       , which fell against
a basket of major currencies.             
    "It seems to be a risk-on event," said Rahim Madhavji,
president at Knightsbridge Foreign Exchange. "There are some
rumors going around that there's some potential breakthrough in
terms of talks with China."    
    Canada is a major producer of commodities, including oil, so
its economy could benefit from improved prospects for global
    U.S. crude oil futures        settled 0.9 percent higher at
$56.09 a barrel, boosted by tightening supplies, while U.S.
stocks extended last week's rally.                          
    At 3:05 p.m. (2005 GMT), the Canadian dollar          was
trading 0.2 percent higher at 1.3210 to the greenback, or 75.70
U.S. cents. The currency touched its strongest intraday level
since Feb. 13 at 1.3207.
    Gains for the loonie come ahead of a speech on Thursday by
Bank of Canada Governor Stephen Poloz. He is due to speak in
Montreal on monetary policy.
    Money markets expect the Bank of Canada to keep interest
rates on hold over the coming months after the central bank said
in January that low oil prices, which have led to production
cuts in Alberta, and a weak housing market, harmed the economy
in the fourth quarter of 2018 and would continue to do so in the
first quarter of this year.             
    Canadian retail sales data for December is due on Friday.
    Canadian government bond prices edged lower across much of
the yield curve, with the two-year            down 0.5 Canadian
cent to yield 1.779 percent and the 10-year             falling
5 Canadian cents to yield 1.901 percent.

 (Reporting by Fergal Smith; Editing by David Gregorio and Peter