* Loonie touches its strongest level since Nov. 19 at 1.3193
* Bank of Canada leaves policy rate on hold at 1.75%
* Price of U.S. oil increases by 4.1%
* Canada's 2-year yield moves further above U.S. equivalent
By Fergal Smith
TORONTO, Dec 4 (Reuters) - The Canadian dollar strengthened to a two-week high against the greenback on Wednesday as investors cut bets that the Bank of Canada would ease interest rates over the coming months after upbeat comments by the central bank on the global economy.
Canada's central bank held its overnight rate at 1.75% as expected and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook. Bank of Canada struck a more optimistic tone in their last monetary policy decision in 2019," said Simon Harvey, FX market analyst for Monex Europe and Monex Canada. "The market implied probability of an insurance rate cut fell dramatically."
Chances of an interest rate cut by March fell to less than 20% from 35% before the rate decision, data from the overnight index swaps market indicated. BOCWATCH
At 3:44 p.m. (2044 GMT), the Canadian dollar CAD=D4 was trading 0.8% higher at 1.3194 to the greenback, or 75.79 U.S. cents, its biggest gain since Sept. 4. The currency touched its strongest intraday level since Nov. 19 at 1.3193.
The gains for the loonie came as U.S. President Donald Trump said that talks with China on an interim trade deal were going "very well," boosting Wall Street. is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade.
U.S. crude oil futures CLc1 jumped 4.1% to $58.40 a barrel on expectations that OPEC and allied producers would extend production curbs, and as U.S. government data showed a large drop in domestic crude stockpiles. data showed that labor productivity grew by 0.2% in the third quarter, as both hours worked and business output slowed, Statistics Canada said. trade report for October is due on Thursday and the November jobs report is due on Friday.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 15.5 Canadian cents to yield 1.638% and the 10-year CA10YT=RR falling 89 Canadian cents to yield 1.545%.
Canada's 2-year yield moved 3.6 basis points further above the U.S. equivalent to a spread of 5.8 basis points in favor of the Canadian bond.