CANADA FX DEBT-C$ hits 2-week low as potential U.S. tax reform weighs

    * Canadian dollar          at C$1.2893, or 77.56 U.S. cents
    * Loonie touches its weakest since Dec. 1 at C$1.2899
    * Bond prices lower across a steeper yield curve

    TORONTO, Dec 19 (Reuters) - The Canadian dollar dipped to a
two-week low against its U.S. counterpart despite trading in a
narrow range on Tuesday, while bond yields climbed as investors
weighed the potential impact of expected U.S. tax reform.
    At 9:24 a.m. ET (1424 GMT), the Canadian dollar          was
trading at C$1.2893 to the greenback, or 77.56 U.S. cents, down
0.2 percent.
    The currency's strongest level of the session was C$1.2852,
while it touched its weakest since Dec. 1 at C$1.2899.
    The U.S. dollar        declined against a basket of major
currencies for a second consecutive day as investors took the
view that a major U.S. tax overhaul would be unlikely to boost
the economy significantly.
    But losses for the greenback were pared after data showed
that U.S. domestic home construction unexpectedly rose in
November to a 13-month peak.             
    Prices of oil, one of Canada's major exports, were supported
by a North Sea pipeline outage, OPEC-led supply cuts and
expectations that U.S. crude inventories probably fell for a
fifth week.             
    U.S. crude        prices were up 0.4 percent at $57.38 a
    Lending to Canadian small businesses slowed in October as
the manufacturing and agriculture sectors pulled back with the
broader economy expected to show a cooler pace of growth in the
second half of 2017, data showed.             
    The loonie had fluctuated last week on remarks by Bank of
Canada Governor Stephen Poloz and weaker-than-expected domestic
manufacturing data.             
    Wholesale trade data for October is due on Wednesday while
Canada's inflation report for November and October retail sales
data are expected on Thursday, and gross domestic product data
for October is due on Friday. 
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries.             
    The two-year            fell 2.5 Canadian cents to yield
1.584 percent and the 10-year             declined 40 Canadian
cents to yield 1.908 percent.

 (Reporting by Fergal Smith; Editing by Phil Berlowitz)