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CANADA FX DEBT-C$ notches 3-week high, underpinned by firm domestic data

(Adds dealer quotes and details; updates prices)

* Canadian dollar at C$1.2646, or 79.08 U.S. cents

* Loonie touches strongest level since Dec. 5 at C$1.2627

* Bond prices mixed across a flatter yield curve

TORONTO, Dec 27 (Reuters) - The Canadian dollar scored a three-week high against its U.S. counterpart on Wednesday, supported by last week's firm domestic data and the recent rally in oil prices.

At 4 p.m. ET (2100 GMT), the Canadian dollar was

trading at C$1.2646 to the greenback, or 79.08 U.S. cents, up 0.3 percent. It touched its strongest level since at Dec. 5, at C$1.2627. "A lot of it is just thin holiday markets and a continuation of the move after the strong data that we saw last week," said David Bradley, director of foreign exchange trading at Scotiabank. Domestic inflation, wholesale trade and retail sales data before the Christmas break boosted bets of a Bank of Canada interest rate hike in January to a 50-50 call, although expectations for a January hike were tempered by data on Friday showing Canada's economic growth stalled in October. Some money managers still expect the loonie to strengthen from here, but USD-CAD needs to close below C$1.26 to confirm that it is breaking out of the roughly C$1.26 to C$1.29 range that has held over the past couple of months, Bradley said. Speculators have added to bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Even so, Canada's economy faces a number of potential headwinds, including tighter mortgage rules that come into effect in January and renegotiation of the North American Free Trade Agreement. Officials from Canada, the United States and Mexico will meet in Montreal Jan. 23-28 for talks on thorny subjects such as autos, dispute settlement and an expiry clause. The U.S. dollar fell on Wednesday to a 3-1/2-week low against a basket of currencies as traders bet more major central banks would begin reducing monetary stimulus in 2018 due to faster economic growth.

The price of U.S. crude oil settled 0.6 percent lower

at $59.64 a barrel, a day after reaching a near two-and-a-half-year high on supply outages in Libya and the North Sea. Oil is one of Canada's major exports. Canadian government bond prices were mixed across a flatter

yield curve, with the two-year down 0.5 Canadian cent to yield 1.665 percent and the 10-year rising 37

Canadian cents to yield 1.98 percent. On Friday, the 2-year yield reached a 6-1/2-year high at 1.709 percent.

(Reporting by Fergal Smith; Editing by Jeffrey Benkoe and Leslie Adler)