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CANADA FX DEBT-C$ weakens as oil weighs, greenback stabilizes

(New throughout, adds strategist comment, details, updates prices and market activity)

* Canadian dollar at C$1.2538, or 79.76 U.S. cents

* Bond prices higher across yield curve

* Canadian jobs and trade data due on Friday

TORONTO, Aug 1 (Reuters) - The Canadian dollar lost ground against its U.S. counterpart on Tuesday as oil prices fell from a two-month high, while the greenback stabilized a day after being pressured by political turmoil in Washington. Oil fell about 2 percent as major world oil producers kept pumping out supply, causing investors to worry that several weeks of steady gains had pushed the rally too far, too fast.

The Canadian dollar has risen more than 10 percent since early May, boosted by a more hawkish tone at the Bank of Canada while investors have grown more cautious about the U.S. Federal Reserve's tightening path and worried about disarray in the White House. On Monday, the greenback fell to its lowest since May 2016 following news that the White House's communications director was leaving the post after 10 days.

At 4 p.m. ET (2000 GMT), the Canadian dollar was

trading at C$1.2538 to the greenback, or 79.76 U.S. cents, down 0.5 percent. "We may have hit a wall here," said Karl Schamotta, director of foreign exchange risk and strategy at Cambridge Global Payments. The currency traded in a range of C$1.2452 to C$1.2547, after hitting its strongest in more than two years at C$1.2414 last Thursday. Schamotta said Canadian importers should consider C$1.25 a very good level at which to buy U.S. dollars, while exporters needing the Canadian currency could likely wait for more attractive opportunities to emerge in September and October. The Bank of Canada last month raised interest rates for the first time in nearly seven years. With no public speeches scheduled before its September interest rate decision, the Bank of Canada has signaled it was comfortable with market expectations that another rate hike will not happen until October, analysts said. Canadian government bond prices were higher across the yield

curve, with the two-year up 10.5 Canadian cents to yield 1.262 percent and the 10-year jumping 83

Canadian cents to yield 1.957 percent. The spread between lower Canadian and higher U.S. yields has narrowed sharply in recent months but turned wider on Tuesday. "There is room for that differential to widen against the Canadian dollar again on the front end at some point here," said Cambridge's Schamotta. Both Canadian and U.S. jobs data for July and domestic trade data for June are due on Friday.

(Additional reporting by Fergal Smith; Editing by W Simon and David Gregorio)