CANADA FX DEBT-C$ pulls back from 1-week high as greenback recovers

(Adds analyst comment, updates prices to close)
    * Canadian dollar settles at C$1.3098 to the greenback, or
76.35 U.S. cents
    * Loonie touched strongest since Jan. 18 at C$1.3054
    * Canadian bond prices mixed across the yield curve
    * Ten-year yield hits highest since Dec. 16 at 1.851 percent

    By Morgan Sharp
    TORONTO, Jan 26 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, pulling back from a
one-week high as the greenback recovered some lost ground
against a basket of major currencies.
    The loonie had rallied this week as investor fears of a more
unfavorable trade outlook for Canada abated and after U.S.
President Donald Trump signed orders on Tuesday smoothing the
path for the Keystone XL oil pipeline, but nervousness remains.
    "For the moment the Mexican peso is taking the brunt of it,
but there are still some spillover effects for the loonie," said
Alphonso Esparza, senior market analyst at OANDA Corp. "It's a
tweet-by-tweet anxiety, that the eye of Trump could settle on
the loonie."
    If constructed, Keystone would provide oil producers in
Canada with a quicker route to send crude to U.S. Gulf Coast
refiners. But analysts and traders said the C$8 billion pipeline
was far from being a certainty. 
    The White House said on Thursday that Trump wants a new 20
percent tax on imports from Mexico to pay for a wall on the
southern border, deepening a crisis after a planned summit
between the two countries' leaders fell through. 
    Trump has said he will open a renegotiation of the NAFTA
trade pact between the United States, Canada and Mexico at an
"appropriate time".
    The U.S. dollar rebounded after its worst run since
August as investors refocused on the chances of higher U.S.
inflation and growth. 
    The Canadian dollar settled at C$1.3098 to the
greenback, or 76.35 U.S. cents, weaker than Wednesday's close of
C$1.3067, or 76.53 U.S.
    The currency's weakest level was C$1.3130, while it touched
its strongest since Jan. 18 at C$1.3054.
    The slip for the Canadian dollar came even as prices of oil,
one of Canada's major exports, rose. U.S. crude prices
settled up nearly 2 percent at $53.78 a barrel.
    Canadian government bond prices were mixed across the yield
curve, with the two-year up half a Canadian cent to
yield 0.815 percent and the 10-year rising 3
Canadian cents to yield 1.819 percent while the 20-year
 price fell C$1.31 to yield 2.438 percent.
    The 10-year yield touched its highest since Dec. 16 at 1.851
percent as Wednesday's record highs on Wall Street reduced
demand for safe-haven assets such as bonds.

 (Additional reporting by Fergal Smith; Editing by James