CANADA FX DEBT-C$ weakens on uncertainty over NAFTA

    * Canadian dollar at C$1.2539, or 79.75 U.S. cents
    * Bond prices lower across the yield curve
    * Canada-U.S. 5-year spread touches its widest in nearly 2

    TORONTO, Oct 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as worries about the
future of NAFTA offset firm oil prices.
    Renegotiation of the North American Free Trade Agreement has
been marked by aggressive U.S. demands that have left the future
of the 23-year-old free trade pact in doubt.             
    Canada sends about 75 percent of its exports to the United
    U.S. Trade Representative Robert Lighthizer, Mexican Economy
Minister Ildefonso Guajardo and Canadian Foreign Minister
Chrystia Freeland are scheduled to meet and take stock of the
negotiations before issuing statements at a joint event at 3
p.m. (1900 GMT).
    Prices of oil, one of Canada's major exports, were steady as
fighting between Iraqi and Kurdish forces threatened supplies
from northern Iraq.             
    U.S. crude        prices were up 0.08 percent at $51.91 a
    At 9:14 a.m. ET (1314 GMT), the Canadian dollar          was
trading at C$1.2539 to the greenback, or 79.75 U.S. cents, down
0.2 percent.
    The currency traded in a range of C$1.2514 to C$1.2554.
    On Monday, the loonie touched a one-week low at C$1.2558. It
has also been pressured recently by reduced expectations for
another Bank of Canada interest rate hike over the coming
    Chances of a rate hike at next week's rate decision have
fallen to around 20 percent from nearly 50 percent in
mid-September, the overnight index swaps market shows.
    Bank of Canada Senior Deputy Governor Carolyn Wilkins will
participate in a panel discussion on blockchain at 3:30 p.m. ET
(1930 GMT).
    Canadian government bond prices edged lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
fell 2 Canadian cents to yield 1.537 percent and the 10-year
            slipped 3 Canadian cents to yield 2.034 percent.
    The gap between the 5-year yield and its U.S. equivalent
widened by 1.3 basis points to a spread of -24.9 basis points,
its widest since Aug. 21.

 (Reporting by Fergal Smith; Editing by Susan Thomas)