CANADA FX DEBT-C$ hits 1-week low as threat to Keystone XL rattles investors

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar weakens 0.1% against the greenback * Loonie touches a one-week low at 1.2799 * Canadian housing starts fall 12.2% in December * Canadian government bond yields were mixed across the curve By Fergal Smith TORONTO, Jan 18 (Reuters) - The Canadian dollar dipped against the greenback on Monday, with investors dialing back hopes of improved U.S.-Canada relations after a report President-elect Joe Biden would cancel a permit for the Keystone XL pipeline as one of his first acts in office. Biden is planning to cancel the permit for the $9 billion project, perhaps as soon as his first day, according to a source familiar with his thinking. The Liberal party government of Prime Minister Justin Trudeau has previously urged Biden not to halt construction of the pipeline, which would move oil from the province of Alberta to Nebraska. "The Canadian dollar is indicating some disappointment on the Keystone XL front," said Adam Button, chief currency analyst at ForexLive. "Few market watchers were expecting the pipeline to be approved but that it will be axed so quickly indicates that Trudeau doesn't have much sway with Biden." The price of oil fell as fears over soaring COVID-19 cases around the world and the slow pace of vaccination against the coronavirus outweighed a better-than-expected quarterly rebound for China's economy. U.S. crude oil prices were down 0.5% at $52.09 a barrel, while the Canadian dollar declined 0.1% to 1.2746 per greenback, or 78.46 U.S. cents. It touched its weakest since last Monday at 1.2799. Canada's economy will hit a major roadblock during the first quarter of 2021 before gaining momentum in the next quarter, according to economists in a Reuters poll. Data from the national housing agency showed that Canadian housing starts fell 12.2% in December compared with the previous month to 228,279 units. Canada's inflation report for December and a Bank of Canada interest rate decision are due on Wednesday. Canadian government bond yields were mixed, with the 10-year up by less than half a basis point at 0.809%. (Reporting by Fergal Smith; Editing by Kirsten Donovan and Jonathan Oatis)