* Canadian dollar at C$1.3221, or 75.64 U.S. cents
* Bond prices mixed across flatter yield curve
* Gap between 2-year and 10-year yields narrowest in 8 months
TORONTO, June 26 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices rose, while softer-than-expected U.S. data weighed on the greenback.
Oil edged up for a third straight session, climbing off last week's seven-month lows, but gains were capped by a relentless rise in U.S. supply and bloated global inventories. O/R
U.S. crude CLc1 prices were up 0.35 percent at $43.16 a barrel.
The U.S. dollar .DXY edged lower against a basket of major currencies after new orders for key U.S.-made capital goods unexpectedly fell in May and shipments also declined, suggesting a loss of momentum in the manufacturing sector halfway through the second quarter. 9:29 a.m. ET (1329 GMT), the Canadian dollar CAD=D4 was trading at C$1.3221 to the greenback, or 75.64 U.S. cents, up 0.4 percent.
The currency traded in a range of C$1.3215 to C$1.3277.
Speculators cut bearish bets on the Canadian dollar 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. of Canada Governor Stephen Poloz will speak in Portugal on Wednesday.
Data on Friday showing weaker-than-expected domestic inflation has reduced the chances of an interest rate hike next month from the Bank of Canada. But analysts expect policymakers to stay hawkish amid concern that rates have been low for too long. BOCWATCH government bond prices were mixed across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR was flat to yield 0.898 percent and the 10-year CA10YT=RR rose 15 Canadian cents to yield 1.459 percent.
The gap between the 2-year and 10-year yields narrowed 1.7 basis points to a spread of 56.1 basis points, its narrowest since Oct. 6.
The U.S. Commerce Department is expected to unveil preliminary anti-dumping duties on Canadian softwood lumber imports.
Canada's gross domestic product data for April is due on Friday. Also on Friday, the Bank of Canada will release its business outlook report.