* Canadian dollar at C$1.2551, or 79.67 U.S. cents
* Loonie touches eight-week high at C$1.2528
* Bond prices mixed across flatter yield curve
By Fergal Smith
TORONTO, April 17 (Reuters) - The Canadian dollar strengthened to an eight-week high against its U.S. counterpart on Tuesday as stocks and oil prices rose, while investors digested stronger-than-expected domestic data ahead of a Bank of Canada interest rate decision on Wednesday.
U.S. stocks climbed on corporate earnings. Higher stock prices tend to signal optimism about the global economic outlook, which is important for Canada's commodity-linked currency. price of oil, one of Canada's major exports, was supported by growing concern over the potential for supply disruptions. U.S. crude oil futures CLc1 settled 0.5 percent higher at $66.52 a barrel. are seeing the oil story helping (the Canadian dollar) more than the rates story is hurting at this stage," said Don Mikolich, executive director, foreign exchange sales at CIBC Capital Markets.
Canada's yields fell further below their U.S. counterparts on Wednesday, with the 2-year spread widening by 0.6 of a basis point to a spread of -50.6 basis points.
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at C$1.2551 to the greenback, or 79.67 U.S. cents. The currency touched its strongest level since Feb. 19 at C$1.2528.
The loonie is on course to strengthen in April for the eighth time in the last 10 years, a sequence strategists link to seasonal vitality in stocks and energy products, rewarding investors who trade on market patterns. factory sales grew by 1.9 percent in February from January on higher sales in the transportation equipment industry, Statistics Canada said. Analysts had forecast an increase of 1.0 percent. markets do not expect the Bank of Canada to raise interest rates this week. But central bank optimism about the country's economic outlook could raise expectations for a hike as soon as next month. BOCWATCH
Canadian government bond prices were mixed across a flatter yield curve, with the two-year CA2YT=RR down 1 Canadian cent to yield 1.884 percent and the 10-year CA10YT=RR rising 24 Canadian cents to yield 2.243 percent.
On Monday, the 10-year yield touched its highest level in nearly four weeks at 2.292 percent.