* Canadian dollar strengthens 0.3% against the greenback
* Touches a two-week high at 1.3411
* Price of U.S. oil settles 1.6% lower
* Canada-U.S. 10-year spread narrows 2.8 basis points
TORONTO, Jan 29 (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Monday as investor sentiment remained upbeat ahead of a Federal Reserve policy decision this week.
The loonie was trading 0.3% higher at 1.3411 to the greenback, or 74.57 U.S. cents, its strongest level since Jan. 15.
"Spreads and stocks have been supportive for the CAD and those drivers likely remain relevant this week, given the Fed policy decision," Shaun Osborne, chief currency strategist at Scotiabank, said in a note.
U.S. stocks rose before this week's slew of megacap earnings, economic data and the Fed's policy announcement on Wednesday, with the S&P 500 on track to eke out yet another record closing high.
Canada is a major exporter of commodities, including oil, so the loonie tends to benefit from the signal that stocks send about the global economic outlook.
U.S. crude oil futures settled 1.6% lower at $76.78 a barrel, giving back some recent gains, as China's ailing property sector sparked demand worries.
Canadian government bond yields also fell. The 10-year was down 7 basis at 3.452%, while the gap between it and the U.S. equivalent narrowed by 2.8 basis points to 61 basis points in favor of the U.S. note. (Reporting by Fergal Smith, editing by Deepa Babington)
