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Canadian dollar gains 0.1% against the greenback

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For the week, the currency was up 0.2%

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Price of U.S. oil increases 0.7%

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Bond yields edge lower across the curve

By Fergal Smith

TORONTO, April 19 (Reuters) - The Canadian dollar

strengthened against its U.S. counterpart on Friday as oil

prices rose and the market took stock of recent losses for the

currency, but the move was limited following the recent move in

yield spreads in favor of the greenback.

The loonie was trading 0.1% higher at 1.3750 per U.S.

dollar, or 72.73 U.S. cents, after trading in a range of 1.3724

to 1.3804. For the week, the currency was up 0.2%.

Still, it was trading not far from a five-month low that it

hit on Tuesday, at 1.3846, following the release of

softer-than-expected domestic consumer price index data.

"The Canadian dollar coming back somewhat is simply

technical from an oversold market," said Michael Goshko, senior

market analyst at Convera Canada.

The slowdown in Canadian inflation has contrasted with the

recent heating up of U.S. price pressures, raising bets the Bank

of Canada would begin easing interest rates before the Federal

Reserve.

"We saw interest rate spreads between Canada and the U.S.

just absolutely widen out," Goshko said. "That definitely had a

negative impact on the Canadian dollar.... "It's going to be

hard for Canada to gain much ground."

The gap between Canada's 2-year yield and the U.S.

equivalent has widened to 73 basis points in favor of the U.S.

note from 45 basis points at the start of the month.

The price of oil, one of Canada's major exports, pared its

earlier gains after Iran played down a reported Israeli attacks

on its soil, in a sign that an escalation of hostilities in the

Middle East might be avoided. Still, U.S. crude oil futures

were up 0.7% at $83.27 a barrel.

Canadian bond yields edged lower across the curve. The

10-year eased 1.7 basis points to 3.737%, but was

holding near a five-month high it touched on Tuesday at 3.810%.