CANADA FX DEBT-Loonie rallies as Canada’s economy beats expectations


 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar strengthens 0.4% against the greenback
    * Canada's economy grows by 0.4% in October
    * Price of U.S. oil settles 2.3% higher
    * Canada's 10-year yield rises 3.3 basis points to 0.736%

    By Fergal Smith
    TORONTO, Dec 23 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday as risk appetite
increased and domestic data showed the economy expanding more
than expected in October, with the currency clawing back some of
this week's decline.
    The loonie        was trading 0.4% higher at 1.2856 to the
greenback, or 77.78 U.S. cents, having traded in a range of
1.2833 to 1.2914.
    "Some mild risk on sentiment today has helped lift oil and
the loonie," said Amo Sahota, director at Klarity FX in San
    U.S. stocks gained as investors appeared to have shrugged
off President Donald Trump's threat not to sign a COVID-19
relief bill and data showed a drop in the number of Americans
filing first-time claims for jobless benefits.              
    The price of oil, one of Canada's major exports, recovered
from earlier losses sparked by an unexpected rise in U.S. crude
oil inventories. U.S. crude oil futures        settled 2.3%
higher at $48.12 a barrel.                 
    The Canadian economy grew by 0.4% in October from September,
which surpassed the 0.3% pace economists had forecast. A flash
estimate for November showed further expansion of 0.4%.
    The October GDP data was "encouraging" for the loonie but
the recent tightening of restrictions to contain a second wave
of the coronavirus will provide headwinds for the economy,
Sahota said.
    Investors have also worried that a new variant of the
coronavirus, discovered spreading swiftly across southern
England, could threaten a vaccine-led recovery in the global
economy. The loonie has fallen 0.6% since the start of the week.
    Canada approved Moderna Inc's          coronavirus vaccine
on Wednesday, the second country to do so.             
    Canadian government bond yields rose across a steeper curve,
with the 10-year             up 3.3 basis points at 0.736%. It
earlier touched a three-week low at 0.686%.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and Peter


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