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CANADA FX DEBT-C$ hits 9-day low before paring losses on trade optimism

Fergal Smith

(Adds dealer quotes and details on activity; updates prices)

* Canadian dollar falls 0.1 percent against the greenback

* Loonie touches its weakest since Jan. 8 at 1.3319

* Price of U.S. oil declines 0.5 percent

* Canadian bond prices were mixed across a steeper yield curve

TORONTO, Jan 17 (Reuters) - The Canadian dollar weakened to its lowest in more than one week against the greenback as oil prices fell, but the currency pared losses as investors weighed a possible end to the U.S.-China trade war. U.S. stocks advanced as a Wall Street Journal report that the United States was considering lifting tariffs on Chinese imports eased investor worries. Canada runs a current account deficit and exports many commodities including oil, so its economy could benefit from improved global trade. Oil was pressured by fears about surging U.S. crude production and a weakening global economy. U.S. crude oil

futures settled 0.5 percent lower at $52.07 a barrel.At 3:37 p.m. (2037 GMT), the Canadian dollar was

trading 0.1 percent lower at 1.3272 to the greenback, or 75.35 U.S. cents. The currency touched its lowest since Jan. 8 at 1.3319. The loonie had strengthened as much as 3.5 percent since the beginning of 2019 before giving up some gains in recent days. The loonie's rally at the start of the year was "overdone," said Scott Lampard, head of global markets at HSBC Bank Canada, adding that the U.S. Federal Reserve would be more active than the Bank of Canada in raising interest rates because of the stronger U.S. economy. Canada's economy is clawing its way through a soft patch, which will delay the next interest rate hike until at least April, according to economists polled by Reuters who said the Bank of Canada would be less aggressive in tightening credit this year. Canada lost 13,000 jobs in December, driven by hiring declines in the trade, transportation and utilities and construction sectors, according to an ADP report released on Thursday. The November total jobs added was revised up to 74,000 from 39,100, ADP said. Canada's inflation report for December is due on Friday. Canadian government bond prices were mixed across a steeper

yield curve, with the two-year up 1 Canadian cent toyield 1.914 percent, and the 10-year falling 3

Canadian cents to yield 1.999 percent. The gap between Canada's 2-year yield and its U.S. equivalent widened by 3.5 basis points to a spread of 66.2 basis points in favor of the U.S. bond.

(Reporting by Fergal Smith Editing by Nick Zieminski and Richard Chang)