CANADA FX DEBT-Loonie cuts weekly decline as oil rallies, trade deficit narrows

    * Canadian dollar rises 0.2% against the greenback
    * Canada's August trade deficit narrows to less than C$1
    * The price of U.S. oil increases 1.3%
    * Canada's 10-year yield touches a near one-month low at

    TORONTO, Oct 4 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday, paring this week's
decline, as oil prices rallied and domestic data showed the
trade deficit narrowed in August.
    Canada posted a trade deficit of C$955 million in August
after a revised C$1.4 billion deficit in July, as both imports
and exports rose, Statistics Canada said. Export volumes were
less encouraging, dipping 0.2%.             
    The price of oil, one of Canada's major exports, rose but
remained on track for a second consecutive weekly loss after
sliding on fears that slower global economic growth would hurt
energy demand. U.S. crude oil futures        were up 1.3% at
$53.12 a barrel.             
    At 9:28 a.m. (1328 GMT), the Canadian dollar          was
trading 0.2% higher at 1.3304 to the greenback, or 75.17 U.S.
cents. The currency, which was on track to decline 0.4% for the
week, traded in a range of 1.3300 to 1.3339.
    The gain for the loonie came as data showed that U.S. job
growth increased moderately in September, which could assuage
financial market concerns that the slowing economy was on the
brink of a recession amid lingering trade tensions.             
    The Canadian dollar will gain ground against its U.S.
counterpart over the coming year, supported by strengthening of
the domestic economy and a narrower gap between Canadian and
U.S. interest rates, a Reuters poll predicted.              
    Canadian government bond prices were lower across much of
the yield curve in sympathy with U.S. Treasuries. The two-year
           fell 3 Canadian cents to yield 1.438% and the
benchmark 10-year             was down 6 Canadian cents to yield
    The 10-year yield touched its lowest intraday level since
Sept. 5 at 1.230%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)