* Canadian dollar gains 0.2% against the greenback

* Trades in a range of 1.3903 to 1.3947

* Services economy contracts in March

* Bond yields trade mixed across the curve

By Fergal Smith

TORONTO, April 6 (Reuters) - The Canadian dollar rose

against its U.S. counterpart on Monday, but the move was limited

as investors weighed developments in the Middle East and data

showed continued contraction in Canada's services economy.

The loonie was trading 0.2% higher at 1.3915 per U.S.

dollar, or 71.86 U.S. cents, after moving in a range of 1.3903

to 1.3947. Last Tuesday, the currency touched a near four-month

low at 1.3966.

The U.S. and Iran weighed a framework plan to end their

five-week conflict, as Tehran said it wanted a lasting end to

the war and pushed back against pressure to swiftly reopen the

Strait of Hormuz under a temporary ceasefire.

"The USD continues to trade at a significant premium

relative to our fair value estimate - 1.3507 currently - which

may result in a sharp fall in the spot rate once market

volatility subsides," Shaun Osborne and Eric Theoret,

strategists at Scotiabank, said in a note.

"Until then, the risk premium on the USD will remain

elevated."

Speculators have raised their bearish bets on the Canadian

dollar, data from the U.S. Commodity Futures Trading Commission

showed on Friday. Non-commercial net-short positions stood at

32,684 contracts as of March 31, from 1,602 in the prior week.

Canada's services economy contracted for a fifth straight month

in March as geopolitical uncertainty contributed to a decline in

new business and after higher fuel costs raised operating

expenses, S&P Global's Canada services PMI data showed.

The headline Business Activity Index rose to 47.2 last month

from 46.5 in February but remained below the 50 no-change mark.

A reading below 50 shows deterioration in activity.

The price of oil, one of Canada's major exports, rose

2.2% to $113.92 a barrel as investors remained wary about

sustained supply losses due to shipping disruptions in the

Strait of Hormuz.

Canadian bond yields were mixed across a flatter curve, with

the 2-year up 2.7 basis points at 2.837%.