* Canadian dollar strengthens 0.2% against the greenback * IHS Markit Canada manufacturing PMI rises to 57.9 in December * Loonie touches its strongest since April 2018 at 1.2665 * Canadian bond yields rise across a steeper curve By Fergal Smith TORONTO, Jan 4 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday as stock markets climbed globally and domestic data showed factory activity expanding in December at its fastest pace on record, with the currency adding to its 2020 gains. The loonie was trading 0.2% higher at 1.2706 to the greenback, or 78.70 U.S. cents, having touched its strongest intraday level since April 2018 at 1.2665. It was up 2% last year. "Firm commodity prices, risk appetite and the better than expected run of Canadian data reports ahead of the break have all helped lift the CAD (Canadian dollar)," said Shaun Osborne, chief currency strategist at Scotiabank. World stock markets notched record highs and the price of oil, one of Canada"s major exports, was up 0.4% at $48.69 a barrel. The U.S. dollar fell to mid-2018 lows against a basket of major currencies as bullish sentiment across global markets prompted investors to buy riskier currencies such as the Chinese yuan and the euro. The IHS Markit Canada Manufacturing Purchasing Managers" index (PMI) rose to a seasonally adjusted 57.9 in December from 55.8 in November as new orders and production climbed, while manufacturers grew more optimistic that output would continue to rise in 2021. Canada"s employment report for December is due on Friday. Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year yield was up 2 basis points at 0.695%. (Reporting by Fergal Smith; editing by Emelia Sithole-Matarise)