CANADA FX DEBT-C$ hits 10-week low on trade worries, lower oil prices

    * Canadian dollar at C$1.2849, or 77.83 U.S. cents
    * Loonie touches weakest since Dec. 20 at C$1.2865
    * Bond prices higher across the yield curve
    * 10-year yield touches a six-week low

    TORONTO, March 1 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, adding to a 10-week
low as oil prices fell and investors weighed the potential
introduction of U.S. trade protection measures.
     The price of oil, one of Canada's major exports, fell for a
third day as rising U.S. inventories, record output and a
stronger dollar outweighed high compliance by major producers
with a supply-cutting deal.             
    U.S. crude        prices were down 1.72 percent at $60.58 a
    U.S. President Donald Trump tweeted that the U.S. steel and
aluminum industries need "free, fair and smart trade" as a U.S.
cable channel reported that he will make an announcement on
tariffs at 11 a.m. (1600 GMT).             
    Trump has also repeatedly threatened to walk away from the
North American Free Trade Agreement between the United States,
Canada and Mexico unless major changes are made.
    Canada sends about 75 percent of its exports to the United
States. Investors worry that a more protectionist trade
environment could hurt Canada's economy.
    At 10:09 a.m. EST (1509 GMT), the Canadian dollar         
was trading 0.1 percent lower at C$1.2849 to the greenback, or
77.83 U.S. cents.
    The currency's strongest level of the session was C$1.2828,
while it touched its weakest since Dec. 20 at C$1.2865.
    The loonie posted in February its biggest monthly decline
since the Alberta wildfire, pressured by a Federal budget on
Tuesday that balked at a response to U.S. tax reform.
    The U.S. dollar        gained ground on Thursday against a
basket of major currencies, boosted by U.S. manufacturing data
and potential monetary policy divergence.              
    Canada's current account deficit narrowed in the fourth
quarter as the country posted a smaller shortfall in the trade
of goods after three consecutive quarters of increases, data
from Statistics Canada showed.             
    Figures for Canada's fourth-quarter economic growth will be
released on Friday, with analysts expecting the annualized rate
to come in below the Bank of Canada's 2.5 percent forecast.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 2 Canadian cents to yield 1.779 percent and the 10-year
            climbed 18 Canadian cents to yield 2.212 percent.
    The 10-year yield touched its lowest intraday since Jan. 17
at 2.197 percent.   

 (Reporting by Fergal Smith
Editing by Susan Thomas)