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CORRECTED-CANADA FX DEBT-C$ rallies, lifted by oil and Fed chief's remarks

(Corrects headline to remove "expeced Bank of Canada rate hike")

* Canadian dollar rises 0.4% against the greenback

* Price of U.S. oil increases 2.2%

* Canada-U.S. 2-year spread narrows by 5.1 basis points

TORONTO, July 10 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday, recovering from a one-week low the day before, as oil prices rose and after comments by Federal Reserve Chairman Jerome Powell weighed on the greenback.

At 8:55 a.m. (1255 GMT), the Canadian dollar was

trading 0.4% higher at 1.3077 to the greenback, or 76.47 U.S. cents. The currency, which on Tuesday touched its weakest level since July 1 at 1.3141, traded in a range of 1.3077 to 1.3137. The gain for the loonie came ahead of an interest rate decision by the Bank of Canada at 10 a.m. ET (1400 GMT). The central bank looks set to raise its second-quarter economic growth forecast and leave its benchmark interest rate unchanged at 1.75%, taking a different tack from some major peers, such as the Fed, which are signaling plans for additional stimulus. In prepared remarks to a congressional committee, Fed's Powell said concerns about trade policy and a weak global economy "continue to weigh on the U.S. economic outlook." and the Fed stands ready to "act as appropriate" to sustain a decade-long expansion. Meanwhile, the price of oil, one of Canada's major exports, was boosted by industry data showing U.S. inventories fell more than expected, while major U.S. producers evacuated rigs in the Gulf of Mexico before a storm. U.S. crude oil futures were up 2.2% at $59.12 a barrel. Canadian government bond prices were mixed across the yield

curve, with the two-year flat to yield 1.642 percentand the benchmark 10-year falling 7 Canadian cents

to yield 1.592%. The gap between Canada's 2-year yield and its U.S. counterpart narrowed by 5.1 basis points to a spread of 21.2 basis points in favor of the U.S. bond, nearly its smallest gap since January 2018.

(Reporting by Fergal Smith; Editing by David Gregorio)