(Adds strategist quotes and details throughout; updates prices) * Canadian dollar touches its weakest since Oct. 6 at 1.2604 * For the week, the loonie declines 0.7% * Price of U.S. oil settles nearly 1% lower * Canadian bond yields ease across a flatter curve By Fergal Smith TORONTO, Nov 12 (Reuters) - The Canadian dollar edged higher against the greenback on Friday but held near its weakest level in more than five weeks, which it hit as oil prices fell and the gap in yields between Canadian and U.S. bonds receded. The loonie was trading 0.2% higher at 1.2546 to the greenback, or 79.71 U.S. cents, after touching its weakest intraday level since Oct. 6 at 1.2604. For the week, the currency was down 0.7%, its fourth straight weekly decline. "Softer crude prices and some marginal narrowing in CAD-positive yield spreads have weighed on CAD sentiment this week," strategists at Scotiabank, including Shaun Osborne, said in a note. The gap between Canadian and U.S. 2-year yields narrowed by 2.6 basis points to 47.3 basis points in favor of the Canadian bond. Earlier this month, it was as wide as 60 basis points. The declining yield advantage comes after data this week showed an acceleration in U.S. inflation, which raised expectations that the Federal Reserve would bring forward an increase to interest rates. The prospect of more rapid Fed tightening has boosted the U.S. dollar and weighed on the price of oil, one of Canada"s major exports. U.S. crude oil futures settled nearly 1% lower at $80.79 a barrel. Canada"s COVID-19 cases are creeping higher as cold weather approaches, health officials said, and more restrictive public health measures may be needed if cases continue to climb. Canadian government bond yields were lower across a flatter curve. The 10-year yield eased 2.6 basis points to 1.671%, after on Wednesday touching its highest intraday level in nearly one week at 1.706%. (Reporting by Fergal Smith; Editing by Kevin Liffey and Grant McCool)
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