Canadian dollar notches two-week high as rate cut bets shrink

(Adds details throughout and updates prices) * Loonie touches its strongest since Nov. 27 at 1.3267 * Price of U.S. oil increases by 1.7% * Canadian productivity grows by 0.2% in the third quarter * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, Dec 4 (Reuters) - The Canadian dollar strengthened to a two-week high against the greenback on Wednesday as investors cut bets that the Bank of Canada would ease interest rates over the coming months after upbeat comments by the central bank on the global economy. The Bank of Canada held its overnight rate at 1.75% as expected and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook. [nL1N28D1SW] "It reads fairly constructively," said Andrew Kelvin, chief Canada strategist at TD Securities. "They do bring the trade tensions into the first paragraph (of the policy statement), but that follows them suggesting that the global economy is stabilizing." Chances of an interest rate cut by March fell to about 20% from 35% before the rate decision, data from the overnight index swaps market indicated. At 10:30 a.m. (1530 GMT), the Canadian dollar was trading 0.5% higher at 1.3234 to the greenback, or 75.56 U.S. cents. The currency touched its strongest intraday level since Nov. 19 at 1.3218. The gains for the loonie came as Wall Street was boosted by a report that the United States and China were moving closer to signing a 'phase one' trade deal. Investors had worried that a deal could be delayed. [nL4N28E36K] Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade. U.S. crude oil futures jumped 3.7% to $58.17 a barrel ahead of an expected extension to production curbs by OPEC and its allies, with further support from industry data showing a larger than forecast drop in U.S. crude stockpiles. [nL4N28E0QG] Canadian labor productivity grew by 0.2% in the third quarter, as both hours worked and business output slowed, Statistics Canada said. [nSCL4NEFLH] Canada's trade report for October is due on Thursday and the November jobs report is due on Friday. Canadian government bond prices were lower across the yield curve, with the two-year down 13.5 Canadian cents to yield 1.627% and the benchmark 10-year falling 79 Canadian cents to yield 1.534%. Canada's 2-year yield moved 3.5 basis points further above the U.S. equivalent to a spread of 5.7 basis points in favor of the Canadian bond. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Nick Zieminski) ((fergal.smith@thomsonreuters.com; +1 416 941 8113;)) Keywords: CANADA FOREX/ (UPDATE 1)

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