TORONTO, Dec 16 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as investors focused on central banks, such as the Bank of Canada, that could join the Federal Reserve in raising interest rates from pandemic-era rock-bottom levels. Britain became the first G7 economy to hike interest rates since the onset of the pandemic, while the Fed signaled plans to tighten in 2022 in a policy decision on Wednesday. read more "The Fed will be raising rates next year but so will the other major central banks as evidenced by today"s rate hike by the Bank of England," said Tony Valente, senior FX dealer at AscendantFX. On Wednesday, Bank of Canada Governor Tiff Macklem said that slack in Canada"s economy caused by the coronavirus pandemic has substantially diminished, a key sign the central bank is set to begin hiking rates soon. Its benchmark interest rate is at a record low of 0.25%. read more Money markets expect the BoC to hike rates in March and about four times in total next year. That is more tightening than is seen from the Fed. The Canadian dollar strengthened 0.4% to 1.2775 per greenback, or 78.28 U.S. cents, after trading in a range of 1.2763 to 1.2857. On Wednesday, the loonie touched its weakest level since Aug. 20 at 1.2936 before rebounding as stocks rallied following the Fed decision. The price of oil, one of Canada"s major exports, was supported by record U.S. implied demand even as the spread of the Omicron coronavirus variant threatens to put a brake on consumption globally. read more U.S. crude futures climbed 2.2% to $72.45 a barrel, while Canadian government bond yields fell, tracking the move in U.S. Treasuries. The 10-year touched its lowest level since Sept. 24 at 1.346% before recovering to 1.352%, down 6 basis points on the day.