CANADA FX DEBT-C$ weakens as oil pares gains

* Canadian dollar at C$1.3277, or 75.32 U.S. cents
    * Bond prices higher across the maturity curve

    TORONTO, Aug 28 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, reversing almost all of
the previous day's gains, as crude oil slipped back and cautious
sentiment pervaded global markets.
    The currency is on track for a 0.8 percent decline over the
week, a tumultuous time when gyrations in China were felt across
asset classes and geographies. 
    At 8:42 a.m. ET (1242 GMT), the Canadian dollar was
trading at C$1.3277 to the greenback, or 75.32 U.S. cents,
weaker than the Bank of Canada's official Thursday close of
C$1.3218, or 75.65 U.S. cents.
    * The currency's strongest level of the session was
C$1.3167, while its weakest was C$1.33.
    * Canadian producer prices unexpectedly rose 0.7 percent in
July, the third consecutive monthly gain, on higher prices for
motorized vehicles and aircraft, Statistics Canada data showed.
    * U.S. crude prices were down 1.2 percent at $42.06 a
barrel, while Brent crude fell 1.3 percent to $46.96.
    * The Canadian dollar, which was underperforming most of its
key currency counterparts, was expected to trade between C$1.32
and C$1.33 against the U.S. dollar on Friday, according to RBC
Capital Markets.
    * Canadian government bond prices were flat to higher across
the maturity curve. The two-year price was up half a
Canadian cent to yield 0.400 percent, and the benchmark 10-year
 rose 51 Canadian cents to yield 1.410 percent.
    * The Canada-U.S. two-year bond spread was -28.4 basis
points, while the 10-year spread was -72.7 basis points.

 (Reporting by Alastair Sharp; Editing by Lisa Von Ahn)