(Adds strategist quotes and details throughout; updates prices) * Canadian dollar strengthens 0.2% against the greenback * For the week, the loonie declines 0.7% * Price of U.S. oil settles 4.1% higher * Canadian bond yields rise across much of a steeper curve By Fergal Smith TORONTO, March 26 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Friday as oil, one of Canada"s major exports, rallied but the currency lost ground for the second straight week. The loonie was trading 0.2% higher at 1.2590 to the greenback, or 79.43 U.S. cents, having traded in a range of 1.2560 to 1.2612. On Thursday, it touched its weakest level in two weeks at 1.2628, while it was down 0.7% for the week as the greenback broadly climbed. "A lot has to do with the overall themes that we"re seeing with energy prices," said Edward Moya, senior market analyst at Oanda in New York. "They have finally bounced back today." U.S. crude oil futures settled 4.1% higher on worries global supplies of crude and refined products could be disrupted for weeks as workers try to dislodge a giant container ship blocking the Suez Canal. "What we are probably going to see is that optimism for the Canadian economy is likely to grow as the Bank of Canada is probably going to be in a position to start to pull back some of that accommodation," Moya said. A hefty Canadian job gain in February and other first quarter data have given the Bank of Canada confidence that the economic recovery will become less choppy, Deputy Governor Toni Gravelle told Reuters on Tuesday. Strategists say that the central bank could reduce its bond purchases in April. Canadian government bond yields were higher across much of a steeper curve, with the 10-year up 2.4 basis points at 1.495%. Still, it has pulled back from a 14-month high last week at 1.677%. Canada"s budget deficit between April and January widened to C$268 billion from a deficit of C$11 billion in the year-ago period, on massive COVID-19 pandemic aid spending, the finance ministry said. (Reporting by Fergal Smith, Editing by Nick Zieminski and Edmund Blair)