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CANADA FX DEBT-C$ adds to 2-month high, on course to rise 7.2 pct in 2017

* Canadian dollar at C$1.2552, or 79.67 U.S. cents

* Loonie touches its strongest since Oct. 20 at C$1.2526

* Bond prices mixed across the yield curve

TORONTO, Dec 29 (Reuters) - The Canadian dollar strengthened to a two-month high against its U.S. counterpart on Friday, as the greenback broadly fell and oil prices rose, with the loonie on track to post its biggest yearly advance since 2009. The loonie has climbed 7.2 percent in 2017, its second straight year of gains as Canada's economy recovered following a plunge in the price of oil, one of the country's major exports. U.S. oil prices have rebounded to reach their highest since mid-2015 as an unexpected fall in American output and a fall in commercial crude inventories stoked buying.

U.S. crude prices were up 0.48 percent at $60.13 a

barrel.

The U.S. dollar slipped to its lowest in more than

three months against a basket of major currencies as the euro and sterling climbed.

At 9:43 a.m. ET (1443 GMT), the Canadian dollar was

trading at C$1.2552 to the greenback, or 79.67 U.S. cents, up 0.1 percent. On Thursday the currency broke out from a roughly 1.26 to 1.29 range it has been trading at over the past two months. On Friday, it touched its strongest since Oct. 20 at C$1.2526. Data before the Christmas break, which showed an acceleration in inflation and strength in wholesale trade and retail sales, has helped underpin the loonie by increasing prospects for further interest rate hikes from the Bank of Canada. Money markets expect Canada's central bank to raise rates three times in 2018, which is more than is expected from the U.S. Federal Reserve. The Bank of Canada raised interest rates in July, and then again in September, for the first time in seven years. Its benchmark interest rate sits at 1 percent. Canadian government bond prices were mixed across the yield

curve, with the two-year up 2 Canadian cents to yield 1.685 percent and the 10-year falling 4 Canadian

cents to yield 2.036 percent.

(Reporting by Fergal Smith; Editing by Susan Thomas)