(Adds strategist quotes and details throughout; updates prices) * Canadian dollar gains 0.4% against the greenback * Canadian economy likely expanded 0.7% in August * Price of U.S. oil settles 1.1% higher * Canadian bond yields ease across flatter curve By Fergal Smith TORONTO, Oct 1 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as stock markets rose and domestic data showed the economy rebounding in August, leaving the currency slightly higher for the week. The loonie was trading up 0.4% at 1.2630 to the greenback, or 79.18 U.S. cents, after trading in a range of 1.2628 to 1.2738. For the week, the currency advanced 0.2% even as the greenback notched sharp gains against a basket of major currencies. The Canadian dollar was helped on Friday by "a risk-on tone re-emerging in markets and also the slight improvement that we"re seeing in oil prices," said Kurt Reiman, senior investment strategist for North America at BlackRock. Wall Street advanced in a broad rally, after sorting out conflicting news about the economy, the battle against COVID-19, and legislative wrangling in Washington at the start of the fourth quarter. "We still think that this pro-cyclical economic environment is supportive for stocks and typically the loonie has that pro-cyclical bent," Reiman said. Pro-cyclical currencies tend to benefit from global economic growth. Canada is a major producer of commodities, including oil. U.S. crude oil futures settled 1.1% higher at $75.88 a barrel, supported by tight supplies due to OPEC+ supply curbs. Canada"s economy expanded 0.7% in August after a slight contraction in July, buoyed by growth in the hospitality industry, preliminary data showed. Separate data showed that Canadian manufacturing activity grew in September at a pace that was little changed from the prior month"s robust level, while global supply shocks helped to lift measures of inflation to record highs. Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasury yields. The 10-year eased 3.5 basis points to 1.473%, after touching on Tuesday its highest in nearly four months at 1.526%. (Reporting by Fergal Smith; Editing by Mark Heinrich and Ken Ferris) Our Standards: The Thomson Reuters Trust Principles.