CANADA FX DEBT-C$ hits one-week low as BoC frets about trade

 (Updates prices)
    * Canadian dollar at C$1.2624, or 79.21 U.S. cents
    * Loonie touches weakest level since April 10 at C$1.2660
    * Bond prices mixed across steeper yield curve

    By Fergal Smith
    TORONTO, April 18 (Reuters) - The Canadian dollar weakened
to a one-week low against its U.S. counterpart on Wednesday,
pressured by a more cautious message on trade than some
investors had expected from the Bank of Canada.
    The Bank of Canada indicated that more interest rate hikes
would be coming after it held its benchmark rate steady at 1.25
percent, but said it did not know when or how aggressive it
would need to be to keep inflation in check.             
    The central bank is signaling "a desire to maintain a bit
more accommodation than would be justified by fundamentals,"
said Eric Theoret, a currency strategist at Scotiabank. "A lot
of it seems to me to be driven by the trade piece."
    The central bank worried about more protectionist global
trade policies despite recent indications that prospects have
improved for a deal to revamp the North American Free Trade
    "It seems at odds with what we have seen on the NAFTA
front," Theoret said.
    Chances of a hike at the next interest rate decision in May
slipped further below 40 percent, the overnight index swaps
market indicated.           
    At 4 p.m. (2100 GMT), the Canadian dollar          was
trading 0.6 percent lower at C$1.2624 to the greenback, or 79.21
U.S. cents. The currency's strongest level of the session was
C$1.2548, while it hit its weakest since April 10 at C$1.2660.
    On Tuesday, the loonie touched its strongest level in nearly
two months at C$1.2528.
    The Canadian dollar is on course to strengthen in April for
the eighth time in the past 10 years, a sequence strategists
link to seasonal vitality in stocks and energy products,
rewarding investors who trade on market patterns.             
    The price of oil, one of Canada's major exports, was lifted
by a decline in U.S. crude inventories and after sources
signaled that top exporter Saudi Arabia wanted to see the crude
price closer to $100 a barrel.             
    U.S. crude        prices settled 2.9 percent higher at
$68.47 a barrel, while stocks on Wall Street were supported by
strong results from some marquee industrial companies. 
    Canadian government bond prices were mixed across the yield
curve, with the two-year            flat to yield 1.885 percent
and the 10-year             falling 28 Canadian cents to yield
2.282 percent.
    The two-year yield reached its highest intraday level since
June 2011 at 1.920 percent, before the Bank of Canada

 (Reporting by Fergal Smith; Editing by Dan Grebler and Peter