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CANADA FX DEBT-Canadian dollar posts 7-week high as rate hike bets climb

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(Adds strategist quotes and details; updates prices) * Canadian dollar strengthens 0.4% against the greenback * Touches its strongest since April 21 at 1.2538 * Price of U.S. oil increases 0.7% * Canadian bond yields rise across flatter curve By Fergal Smith TORONTO, June 6 (Reuters) - The Canadian dollar rose to its highest level in nearly seven weeks against its U.S. counterpart on Monday as equity markets rallied and investors priced in more aggressive tightening this year by the Bank of Canada than the Federal Reserve. The Canadian dollar was trading 0.1% higher at 1.2575 per U.S. dollar, or 79.52 U.S. cents, after touching its strongest since April 21 at 1.2536. It was the only G10 currency other than sterling to gain ground against the greenback. "I think there is a good story for Canada," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "As the market has ratcheted up the Fed's tightening they have also done it to Canada but more so." Money markets expect the Bank of Canada to lift its benchmark interest rate to 3.25% by the end of 2022, which is about 40 basis points more than is seen for the Fed's policy rate. The loonie's advance came as stocks clawed back some of last week's decline and the price of oil, one of Canada's major exports, touched its highest in more than three months at $120.99 a barrel before settling 0.3% lower at $118.50. Speculators have cut their bearish bets on the Canadian dollar for a second straight week, data from the U.S. Commodity Futures Trading Commission showed on Friday. Canadian government bond yields were higher across the curve on Monday, with the 2-year climbing 12.8 basis points to 3.042%, its highest since July 2008. The gap between Canadian and U.S. 2-year yields widened by 5.9 basis points to 30.6 basis points in favor of the Canadian bond, the biggest gap since last December. (Reporting by Fergal Smith; Editing by Lisa Shumaker and Alistair Bell)