CANADA FX DEBT-C$ climbs to 2-1/2-month high as EU recovery plan cheers investors

* Canadian dollar rises 0.1% against the greenback * Loonie touches its strongest since March 12 at 1.3727 * Price of U.S. oil decreases 1.5% * Canadian bond yields rise across the curve TORONTO, May 27 (Reuters) - The Canadian dollar strengthened against the greenback on Wednesday to its highest in about two-and-a-half months, as reports of a European Union rescue fund supported investor sentiment, helping to offset a pullback in oil prices. World shares surged as the European Commission proposed a package worth in total 1.85 trillion euros for the EU's next long-term budget and a recovery fund for economies hammered by the coronavirus pandemic. The price of oil, one of Canada's major exports, fell after U.S. President Donald Trump said he was working on a strong response to China's proposed security law in Hong Kong. U.S. crude oil futures fell 1.5% to $33.82 a barrel after trading on Tuesday at their highest in more than two months. The Canadian dollar was up 0.1% at 1.3759 to the greenback, or 72.68 U.S. cents. The currency touched its strongest intraday level since March 12 at 1.3727. The value of Canadian building permits dropped by 17.1% in April from March, Statistics Canada said. Non-essential business was halted across Canada in April to help contain the spread of the novel coronavirus. Canada's first-quarter GDP report is due on Friday, which can help guide expectations for next week's Bank of Canada interest rate decision. On Tuesday, Bank of Canada Governor Stephen Poloz, making his last public appearance as governor before he retires next week, said the central bank can deliver more monetary stimulus if needed to meet its 2% inflation target as the economy recovers from the pandemic. Canadian government bond yields were higher across the curve on Wednesday, with the 10-year up 1.1 basis points at 0.562%. (Reporting by Fergal Smith; Editing by Steve Orlofsky)