(Adds strategist quote and details throughout; updates prices) * Canadian dollar strengthens 0.4% against the greenback * Canada"s economy grows by 0.4% in October * Price of U.S. oil settles 2.3% higher * Canada"s 10-year yield rises 3.3 basis points to 0.736% By Fergal Smith TORONTO, Dec 23 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as risk appetite increased and domestic data showed the economy expanding more than expected in October, with the currency clawing back some of this week"s decline. The loonie was trading 0.4% higher at 1.2856 to the greenback, or 77.78 U.S. cents, having traded in a range of 1.2833 to 1.2914. "Some mild risk on sentiment today has helped lift oil and the loonie," said Amo Sahota, director at Klarity FX in San Francisco. U.S. stocks gained as investors appeared to have shrugged off President Donald Trump"s threat not to sign a COVID-19 relief bill and data showed a drop in the number of Americans filing first-time claims for jobless benefits. The price of oil, one of Canada"s major exports, recovered from earlier losses sparked by an unexpected rise in U.S. crude oil inventories. U.S. crude oil futures settled 2.3% higher at $48.12 a barrel. The Canadian economy grew by 0.4% in October from September, which surpassed the 0.3% pace economists had forecast. A flash estimate for November showed further expansion of 0.4%. The October GDP data was "encouraging" for the loonie but the recent tightening of restrictions to contain a second wave of the coronavirus will provide headwinds for the economy, Sahota said. Investors have also worried that a new variant of the coronavirus, discovered spreading swiftly across southern England, could threaten a vaccine-led recovery in the global economy. The loonie has fallen 0.6% since the start of the week. Canada approved Moderna Inc"s coronavirus vaccine on Wednesday, the second country to do so. Canadian government bond yields rose across a steeper curve, with the 10-year up 3.3 basis points at 0.736%. It earlier touched a three-week low at 0.686%. (Reporting by Fergal Smith; Editing by Andrea Ricci and Peter Cooney)