(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.5% against the greenback * Loonie touches its strongest since Jan. 27 at 1.3147 * Chrystia Freeland becomes Canada's new finance minister * Canadian bond yields ease across the curve By Fergal Smith TORONTO, Aug 18 (Reuters) - The Canadian dollar strengthened to its highest level in nearly seven months against its U.S. counterpart on Tuesday as the greenback broadly declined and investors weighed the potential impact on policy of the new finance minister. Canadian Prime Minister Justin Trudeau appointed his close ally and deputy Chrystia Freeland as the country's finance minister amid plans to outline a revamped agenda and coronavirus pandemic recovery plan. Freeland replaces Bill Morneau who resigned on Monday amid friction with Trudeau. "The market is in a wait-and-see mode until it gets a hint of how Freeland plans to operate," said Adam Button, chief currency analyst at ForexLive. "Right now the market is more focused on the growth paradigm ... if Freeland is looser (with fiscal policy) it will be CAD-positive," Button said. Canada's budget deficit is forecast to hit C$343.2 billion this fiscal year. At about 16% of gross domestic product, it will be the largest shortfall since World War Two. The Canadian dollar was trading 0.5% higher at 1.3154 to the greenback, or 76.02 U.S. cents. The currency notched its strongest intraday level since Jan. 27 at 1.3147. The U.S. dollar index fell to its lowest level in more than two years, as the ongoing effects of the Federal Reserve's stimulus programs weakened the dollar broadly for the fifth consecutive day and lifted U.S. stock indexes to record highs. The price of oil, one of Canada's major exports, steadied as demand fears tied to the new coronavirus offset high compliance with supply cuts from the OPEC+ producer group. U.S. crude futures settled at an unchanged level of $42.89 a barrel. Canadian government bond yields eased across the curve in sympathy with U.S. Treasuries, with the 10-year down 2.2 basis points at 0.562%. Last Thursday, it notched a two-month high at 0.642%. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Paul Simao)
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