* Canadian dollar at C$1.2291, or 81.36 U.S. cents
* Loonie touches its strongest since Sept. 20 at C$1.2250
* Bond prices mixed across flatter yield curve
* 2-year yield touches its highest in 6-1/2 years
TORONTO, Jan 31 (Reuters) - The Canadian dollar strengthened to a four-month high against its U.S. counterpart on Wednesday as the greenback broadly fell ahead of a Federal Reserve interest rate decision and after data showed strong growth in Canada's economy in November. At 9:13 a.m. EST (1413 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2291 to the greenback, or 81.36 U.S. cents. The currency touched its strongest since Sept. 20 at C$1.2250. Canadian gross domestic product rose by 0.4 percent in November from October, Statistics Canada said. The increase was in line with economists' expectations and the biggest gain since May 2017. The data supported expectations for growth to accelerate in the fourth quarter, but likely not as fast as the 2.5 percent annualized gain that the Bank of Canada has projected, Ryan Brecht, a senior economist at Action Economics, said in a research note. The central bank has raised interest rates three times since July. Money markets expect another hike by May.
The U.S. dollar fell against a basket of major
currencies after a pickup in eurozone underlying inflation helped support the euro. Financial markets expect the Fed to take a more confident stance about the outlook of the economy but keep policy unchanged. On Tuesday, U.S. President Donald Trump called on the U.S. Congress to pass legislation to ensure at least $1.5 trillion in new infrastructure spending. The price of oil, one of Canada's major exports, fell for a third day after data that showed U.S. inventories rose more than expected.
U.S. crude prices were down 0.37 percent to $64.26 a
barrel. Canadian government bond prices were mixed across a flatter yield curve in sympathy with U.S. Treasuries. The two-year dipped 1 Canadian cent to yield 1.836 percent and the
10-year climbed 9 Canadian cents to yield 2.282
percent. The 2-year yield touched its highest since June 2011 at 1.849 percent.
(Reporting by Fergal Smith; Editing by Nick Zieminski)