(Adds analyst quotes and details on Bank of Canada interest rate expectations and NAFTA and updates prices)
* Canadian dollar ends at C$1.3496, or 74.10 U.S. cents
* Bond prices lower across the yield curve
* 10-year yield touches its highest intraday since December
By Fergal Smith
TORONTO, Nov 23 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as U.S. data reinforced expectations of Federal Reserve interest rate hikes and market players looked past an upcoming meeting of major oil producers.
The loonie hit its weakest in eight months last week at C$1.3589, but recovered some ground in recent days as oil rallied on hopes of a supply cut at an upcoming meeting of the Organization of the Petroleum Exporting Countries.
Divergence between U.S. and Canadian monetary policy and economic growth will drive the loonie to fresh lows once the OPEC meeting is past, said Jimmy Jean, senior economist at Desjardins.
"Our forecast is for the Canadian dollar to close the year at 1.3700 and depreciate even further in 2017," Jean added.
The U.S. dollar .DXY and bond yields climbed as U.S. data showed the economy is on track for steady growth. expect rate increases by the Fed next month and in 2017. In contrast, the Bank of Canada is expected to stand pat until 2018, a Reuters poll shows. CA/POLL
Canada's 2-year yield fell 2 basis points further below its U.S. equivalent to -45.9 basis points, its largest gap since January, as U.S. Treasuries underperformed.
The Canadian dollar CAD=D4 ended at C$1.3496 to the greenback, or 74.10 U.S. cents, weaker than Tuesday's close of C$1.3453, or 74.33 U.S. cents.
The currency's strongest level of the session was C$1.3425, while its weakest was C$1.3517.
U.S. crude oil futures CLc1 settled 7 cents lower at $47.96 a barrel amid doubts that OPEC would agree a large enough production cut to significantly reduce the global crude surplus when it meets next week. O/R
Oil is one of Canada's major exports.
Labor market reforms could both improve the North American Free Trade Agreement and help address U.S. concerns about illegal immigration from Mexico, a senior Mexican official said. President-elect Donald Trump has vowed to tear up or renegotiate NAFTA - a trade pact under which Mexico and Canada send a large majority of their exports to the United States.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3 Canadian cents to yield 0.672 percent and the benchmark 10-year CA10YT=RR falling 9 Canadian cents to yield 1.55 percent.
The 10-year yield touched its highest intraday since December at 1.614 percent.
Bond yields have been rising since the U.S. election as investors bet that Trump will pursue policies that boost inflation.