* Canadian dollar at C$1.3097, or 76.35 U.S. cents
* Loonie touches its strongest since Feb. 24 at C$1.3076
* Chances of a rate hike in July rise to 45 percent
* Bond prices lower across the yield curve
By Fergal Smith
TORONTO, June 28 (Reuters) - The Canadian dollar strengthened to a 4-month high on Wednesday against its U.S. counterpart, boosted by comments by Bank of Canada Governor Stephen Poloz that raised expectations of an interest rate hike as early as next month.
Interest rate cuts made in 2015 have done their job and the Bank of Canada needs to consider its options at its upcoming interest rate decision as excess capacity is used up, Poloz said in a CNBC interview in Europe. a pretty solid signal that a July rate hike is very much on the table, Benjamin Reitzes, senior economist at BMO Capital Markets, said in a research note.
Chances of a rate hike next month rose to 45 percent from 30 percent on Tuesday, data from the overnight index swaps market showed. BOCWATCH
At 9:44 a.m. ET (1344 GMT), the Canadian dollar CAD=D4 was trading at C$1.3097 to the greenback, or 76.35 U.S. cents, up 0.8 percent.
The currency's weakest level of the session was C$1.3198, while it touched its strongest since Feb. 24 at C$1.3076.
Strengthening of the loonie could pressure speculators to further reduce bearish bets on the currency, which had reached a record high in May.
Speculators cut bearish bets on the loonie for a fourth straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar net short positions fell to 82,881 contracts as of June 20 from 88,595 a week earlier.
Prices of oil, one of Canada's major exports, edged lower after an industry report said U.S. inventories increased. U.S. crude CLc1 prices were down 0.16 percent at $44.17 a barrel. government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 7.5 Canadian cents to yield 1.023 percent and the 10-year CA10YT=RR falling 38 Canadian cents to yield 1.614 percent.
The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 4.6 basis points to a spread of -34.2 basis points, its narrowest since Nov. 14, as Canadian government bonds underperformed.
Canada's gross domestic product data for April and the Bank of Canada's business outlook report are due on Friday. ECONCA