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CANADA FX DEBT-Canadian dollar rallies as oil climbs to 11-month high

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar strengthens 0.5% against the greenback
    * Loonie trades in a range of 1.2711 to 1.2791
    * Price of U.S. oil settles 1.7% higher
    * Canada's 10-year yield touches its highest since March at
0.887%

    By Fergal Smith
    TORONTO, Jan 12 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday as oil prices rose and
the greenback broadly declined, with the currency rebounding
from its weakest in nearly two weeks the day before.
    The loonie        was trading 0.5% higher at 1.2714 to the
greenback, or 78.65 U.S. cents, having traded in a range of
1.2711 to 1.2791. On Monday, it touched its weakest since Dec.
29 at 1.2835.
    The move higher for the loonie was down to the rally in oil
and "general market sentiment," said Tony Valente, senior FX
dealer at AscendantFX, adding that it's "a slow news week ahead
of next week's Bank of Canada policy meeting."
    Money markets see an increased chance of the Bank of Canada
cutting interest rates closer to zero, as tightening economic
restrictions to contain a second wave of COVID-19 cases offset
optimism that activity will rebound later this year.
            
    Ontario declared an emergency after the latest modeling put
Canada's most populous province on track to have more than
20,000 new COVID-19 cases per day by the middle of February.
                
    Oil, one of Canada's major exports, rose to its highest
since last February as Saudi Arabia's plans to limit supply
offset worries that rising coronavirus cases globally would
curtail fuel demand.             
    U.S. crude oil futures        settled 1.7% higher at $56.68
a barrel, while the U.S. dollar edged lower against a basket of
currencies, as its recent rally, driven by a spike in U.S.
Treasury yields, appeared to run out of steam.             
    Canadian government bond yields were mixed across a steeper
curve in tandem with U.S. Treasuries. The 10-year            
was little changed at 0.844%, having touched its highest
intraday since March 26 at 0.887%.

 (Reporting by Fergal Smith; Editing by Kirsten Donovan and
Jonathan Oatis)
  
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