* Canadian dollar at C$1.2863, or 77.74 U.S. cents
* Loonie touches its strongest since March 12 at C$1.2815
* Oil prices rise 1.0 percent
* Bond prices higher across a flatter yield curve
TORONTO, March 27 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday, pulling back from an earlier two-week high, as broader gains for the greenback offset higher oil prices.
The U.S. dollar rose against a basket of major
currencies as worries about the momentum of the euro zone's economic expansion weighed on the euro. The price of oil, one of Canada's major exports, climbed on concern that tensions in the Middle East could lead to supply disruptions.
U.S. crude prices were up 1.0 percent at $66.22 a
barrel, while global stocks added to Monday's gains as fears receded of a trade war between the United States and China.
At 8:57 a.m. ET (1257 GMT), the Canadian dollar was
trading 0.2 percent lower at C$1.2863 to the greenback, or 77.74 U.S. cents. The currency's weakest level of the session was C$1.2903, while it touched its strongest since March 12 at C$1.2815. Reduced fears of a global trade war had helped boost Canada's commodity-linked currency on Monday. The loonie has also benefited in the last week from optimism about a deal to revamp the North American Free Trade Agreement and hotter-than-expected domestic inflation data. Canadian government bond prices were higher across a flatter
yield curve, with the two-year up 3.5 Canadian cents to yield 1.864 percent and the 10-year rising 26
Canadian cents to yield 2.2 percent. The gap between Canada's 10-year yield and its U.S. equivalent widened by 2.6 basis points to a spread of -63.4 basis points. Canada's gross domestic product data for January is due on Thursday.
(Reporting by Fergal Smith Editing by Nick Zieminski)