(Adds analyst quotes, details; updates prices)
* Canadian dollar ended at C$1.3444, or 74.38 U.S. cents
* Bond prices lower across a steeper yield curve
* 10-year yield touches its highest since June 2015
By Fergal Smith
TORONTO, March 13 (Reuters) - The Canadian dollar rose on Monday against its U.S. counterpart as a narrower gap between Canadian and U.S. yields offset lower prices for oil, one of Canada's major exports.
The gap between Canadian and U.S. 2-year yield narrowed by 1.5 basis points to a spread of -50.1 basis points. Earlier in March it had touched its widest gap since January 2016 at -55.2 basis points. The narrower gap reduces investor incentive to hold higher yielding U.S. dollars.
"A little bit of shrinking in the U.S. dollar's yield advantage and I would point that back to Friday's (Canadian) payrolls number," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
The 15,300 increase in Canadian jobs in February easily topped economists' expectations and extended the labor market's recent strong run. on Friday also showed a robust pace of hiring by U.S. employers, supporting expectations for a Federal Reserve interest rate hike on Wednesday. is not like the Bank of Canada is going to tighten to follow the Fed, but if (Bank of Canada Governor Stephen) Poloz comes out and is dovish ... well nobody is going to believe the dovishness," Anderson said.
The chances of a Bank of Canada rate hike this year rose to more than 50 percent, data from the overnight index swaps market showed. It was less than 30 percent after the Bank of Canada left rates on hold at the start of the month and focused on the "significant uncertainties" facing the economy. BOCWATCH
U.S. crude CLc1 prices settled 9 cents lower at $48.40 a barrel after touching three-month lows, pressured by swelling U.S. supplies. Canadian dollar CAD=D4 ended at C$1.3444 to the greenback, or 74.38 U.S. cents, stronger than Friday's close of C$1.3463, or 74.28 U.S. cents.
The range for the currency was C$1.3431 to C$1.3473.
Speculators trimmed bullish bets on the Canadian dollar, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday. But net long positions in the loonie held near the highest since February 2013. investors are "vulnerable to repositioning over the next two weeks," said Anderson.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 6 Canadian cents to yield 0.875 percent and the 10-year CA10YT=RR falling 49 Canadian cents to yield 1.871 percent.
The 10-year yield touched its highest since June 2015 at 1.876 percent.