* Canadian dollar at C$1.3109, or 76.28 U.S. cents
* Loonie touches its strongest since Oct. 19 at C$1.3106
* Bond prices higher across a flatter yield curve
TORONTO, Dec 13 The Canadian dollar strengthened
for the fifth straight day against its U.S. counterpart on
Tuesday, posting a near eight-week high as higher oil prices
offset expected monetary policy divergence between the U.S. and
U.S. crude prices were up 0.66 percent at $53.18 a
barrel, supported by strong demand in Asia and supply cuts by
Abu Dhabi, Kuwait and Qatar as part of production curbs
organized by the Organization of the Petroleum Exporting
Countries and other exporters.
Oil is one of Canada's major exports.
Fed fund futures show a 97-percent probability that the
Federal Reserve will lift rates by a quarter of a percentage
point at the end of its two-day policy meeting on Wednesday,
according to the CME Group.
In contrast, the Bank of Canada pointed last week to
"significant" slack in the Canadian economy as it held interest
rates steady, setting the stage for divergence in policy from
that of the Fed.
At 9:20 a.m. EDT (1420 GMT), the Canadian dollar
was trading at C$1.3109 to the greenback, or 76.28 U.S. cents,
stronger than Monday's close of C$1.3134, or 76.14 U.S. cents.
The currency's weakest level of the session was C$1.3139,
while it touched its strongest since Oct. 19 at C$1.3106.
The loonie has rebounded 3.7 percent from an eight-month low
of C$1.3589 in mid-November. Higher prices for oil have offset
raised investor expectations for Fed rate increases and a more
uncertain trade environment for Canada since the U.S. election.
Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries.
The two-year rose 2.5 Canadian cents to yield
0.747 percent and the benchmark 10-year climbed 30
Canadian cents to yield 1.712 percent.
On Monday, the 10-year yield touched its highest intraday
level since July 2015 at 1.781 percent.
(Reporting by Fergal Smith; Editing by Nick Zieminski)