CANADA FX DEBT-Canadian dollar firms along with higher oil prices

    * Canadian dollar rises 0.2% against the greenback
    * Loonie trades in a range of 1.2730 to 1.2791
    * Price of U.S. oil increases 1.4%
    * Canadian bond yields move higher across a steeper curve

    TORONTO, Jan 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday as oil rallied and the
greenback fell against a basket of major currencies, but gains
for the loonie were capped as investors weighed prospects for
U.S. Senate runoff elections.
    The price of oil, one of Canada's major exports, rose as
tension simmered following Iran's seizure of a South Korean
vessel and as the OPEC+ group studied a possible production cut
in February.             
    U.S. crude        prices were up 1.4% at $48.28 a barrel,
while the U.S. dollar        lost ground after China lifted its
official yuan exchange rate by its highest margin since it
abandoned a dollar peg in 2005.             
    The Canadian dollar        was trading 0.2% higher at 1.2755
to the greenback, or 78.40 U.S. cents. The currency traded in a
range of 1.2730 to 1.2791. On Monday, it notched a near
three-year high at 1.2661 before pulling back.    
    World shares          struggled on Tuesday amid new COVID-19
lockdowns in Europe and Senate runoff races in Georgia that will
affect incoming U.S. President Joe Biden's ability to pursue his
preferred economic policies.             
    Canada sends about 75% of its exports to the United States.
Canada's trade report for November is due on Thursday, while the
December jobs report is set for Friday.
    Canadian government bond yields were higher across a steeper
curve in sympathy with U.S. Treasuries. The 10-year            
rose 1.7 basis points to 0.694%.

 (Reporting by Fergal Smith; 
Editing by Bernadette Baum)