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CANADA FX DEBT-Loonie steadies as higher oil prices offset trade war fears

Fergal Smith

(Adds strategist quote and details throughout; updates prices)

* Canadian dollar trades near flat against the greenback

* Canadian housing starts jump to 235,460 units in April

* Price of U.S. oil increases 1.2%

* Canada's 10-year yield hits a five-week low intraday at 1.654%

TORONTO, May 8 (Reuters) - The Canadian dollar was barely changed against the greenback on Wednesday, as higher oil prices and domestic data showing a sharp rise in housing starts offset fears of a worsening in the trade dispute between the United States and China. At 3:34 p.m. EDT (1934 GMT), the Canadian dollar was trading nearly unchanged at 1.3471 to the greenback, or 74.23 U.S. cents. The currency, which has declined 3% since February, traded in a narrow range of 1.3445 to 1.3486. "There are two counteracting forces," said Rahim Madhavji, president at Knightsbridge Foreign Exchange. The move up in oil prices is offsetting the potential falling apart of U.S.-China trade talks, Madhavji added. The United States will raise tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent effective on Friday, according to a notice posted to the Federal Register on Wednesday. Canada runs a current account deficit and exports many commodities, including oil, so its economy could suffer if the global flow of capital or trade slows. The price of oil was boosted by a surprise drawdown in U.S. crude stockpiles but an escalating U.S.-Chinese trade fight

limited oil's gains. U.S. crude oil futures settled 1.2

percent higher at $62.12 a barrel. Canadian housing starts surged nearly 23 percent from March to 235,460 units as groundbreaking increased on multiple unit and single detached urban homes, data from the national housing agency showed. The data could support the Bank of Canada's view that the housing market will recover after slowing since the start of 2018. Canada's trade report for March is due on Thursday, while the April jobs report is due on Friday. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 4 Canadian cents to yield 1.600% and the 10-year declined 26 Canadian cents to yield 1.712%. Earlier in the day, the 10-year yield touched its lowest since April 2 at 1.654%.

(Reporting by Fergal Smith Editing by Marguerita Choy)