CANADA FX DEBT-C$ slips as Trump-Trudeau fallout adds to trade worries

 (Adds strategist quotes, updates prices)
    * Canadian dollar at C$1.2985, or 77.01 U.S. cents
    * Bond prices higher across yield curve
    * Canada-U.S. 2-year spread hits widest in over a year

    By Fergal Smith
    TORONTO, June 11 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday after U.S. President
Donald Trump, who has threatened to scrap the NAFTA trade pact,
lashed out at Canadian Prime Minister Justin Trudeau in their
feud over trade.
    Trump fired off a volley of tweets venting anger at NATO
allies, the European Union and Trudeau himself in the wake of a
divisive G7 leaders' summit over the weekend.             
    Trump tweeted on Saturday that Trudeau's remarks at a news
conference, where he said Canada would not be pushed around,
"were very dishonest and weak."
    "I think it is all about G7," said Mark McCormick, North
American head of FX Strategy at TD Securities. "You have the
lingering uncertainties over NAFTA ... you still have room now
for Trump to walk away." 
    The loonie has been pressured recently by new U.S. tariffs
on steel and aluminum imports as well as slow-moving talks to
modernize the North American Free Trade Agreement, known as
    Canada sends about 75 percent of its exports to the United
States and its economy would be hit hard if NAFTA were scrapped.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.4 percent lower at C$1.2985 per greenback, or 77.01
U.S. cents. The currency traded in a range of C$1.2957 to
    Losses for the loonie came after data on Friday showed the
Canadian economy unexpectedly shed jobs in May. Still, wages
rose at their strongest annual pace in nearly six years, which
could give the central bank room to raise interest rates as soon
as July.             
    Speculators have added to bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed on Friday. As of June 5, net
short positions rose to 16,039 contracts from 15,690 a week
    The price of oil, one of Canada's major exports, rose even
as comments from the Iraqi oil minister cast doubt as to whether
OPEC would decide to boost output at its upcoming meeting.
    U.S. crude oil futures        settled 0.6 percent higher at
$65.05 a barrel.      
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 3.5 Canadian cents to
yield 1.907 percent and the 10-year             rising 13
Canadian cents to yield 2.308 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 4.7 basis points to a spread of -61.7
basis points, its widest since May 2017.

 (Reporting by Fergal Smith, editing by G Crosse)