CANADA FX DEBT-C$ notches 2-year high on prospects of further rate hikes

* Canadian dollar at C$1.2165, or 82.20 U.S. cents

* Loonie touches its strongest since June 2015 at C$1.2139

* Bond prices lower across the yield curve

TORONTO, Sept 7 (Reuters) - The Canadian dollar strengthened on Thursday to a 2-year high against its U.S. counterpart as the market weighed prospects of additional Bank of Canada interest rate hikes and the greenback lost ground against a basket of major currencies. The Bank of Canada struck a more confident approach to economic growth on Wednesday with its second rate hike in three months, pushing to the front of the pack of major central banks including the U.S. Federal Reserve. The central bank has now taken back two cuts it delivered in 2015 to offset the impact on the economy of a sharp drop in the price of oil, one of Canada's major exports. Market players have been weighing prospects of additional hikes. "The upbeat view on growth point to more tightening than we previously expected over the next year," Robert Kavcic, senior economist at BMO Capital Markets, said in a research note.

The U.S. dollar fell broadly as the European Central

Bank stuck to its outlook for growth and inflation.

At 9:35 a.m. ET (1335 GMT), the Canadian dollar was

trading at C$1.2165 to the greenback, or 82.20 U.S. cents, up 0.5 percent. The loonie's weakest level of the session was C$1.2241, while it touched its strongest since June 2015 at C$1.2139. Oil prices dipped, but hovered near 3-1/2-month highs as U.S. refiners restarting after Hurricane Harvey increased their crude processing and as the U.S. dollar declined.

U.S. crude prices were last down 0.41 percent at

$48.96 a barrel. Canadian government bond prices were lower across the yield

curve, with the two-year down 6.5 Canadian cents to yield 1.485 percent and the 10-year falling 17

Canadian cents to yield 1.966 percent. Canada's employment report for August is due on Friday.

(Reporting by Fergal Smith; Editing by Meredith Mazzilli)