* Loonie holds near its strongest level since March 13

* Price of oil rises 4.2%

* New housing prices fall 0.2% in March

* Bond yields trade mixed across the curve

By Fergal Smith

TORONTO, April 22 (Reuters) - The Canadian dollar

steadied near a six-week high against its U.S. counterpart on

Wednesday as oil prices rose and investors awaited signs of

diplomatic progress to end the war in the Middle East.

The loonie was trading nearly unchanged at 1.3660 per

U.S. dollar, or 73.21 U.S. cents. On Tuesday, the currency

touched its strongest intraday level since March 13 at 1.3629.

"Tuesday's price action suggests markets remain more focused

on global risk appetite than on domestic fundamentals," analysts

at Monex Europe said in a note.

Iran seized two ships in the Strait of Hormuz on Wednesday,

tightening its grip on the strategic waterway after U.S.

President Donald Trump called off attacks with no sign of peace

talks restarting.

"Should a ceasefire extension hold, and oil prices

stabilise, we could see CAD recover toward its recent highs. But

until there is tangible progress on the diplomatic front, we

expect choppy trading conditions to persist," the Monex analysts

said.

The safe-haven U.S. dollar rose against a basket of major

currencies and the price of oil was trading 4.2% higher

at $93.42 a barrel.

Oil is one of Canada's major exports, which have been

disrupted in the past year by hefty U.S. tariffs on critical

sectors, such as autos, steel and aluminum. The United

States-Mexico-Canada Agreement, a continental trade pact, is set

for review by a July 1 deadline.

Canada is not a supplicant that will allow the United States to

dictate the terms for a review of the USMCA, Prime Minister Mark

Carney said.

Domestic data showed that new housing prices fell 0.2% in March

from February.

February retail sales data, due on Friday, could offer

additional clues on the state of the domestic economy, with

economists expecting a monthly increase of 0.9%.

Canadian government bond yields were mixed across the curve,

with the 10-year down less than a basis point at

3.478%.

(Reporting by Fergal Smith; Editing by Kirsten Donovan )