CANADA FX DEBT-C$ hits 10-week low ahead of Bank of Canada rate decision

    * Canadian dollar at C$1.2680, or 78.86 U.S. cents
    * Loonie touches its weakest since Aug. 16 at C$1.2723.
    * Bond prices lower across a steeper yield curve

    TORONTO, Oct 25 (Reuters) - The Canadian dollar weakened to
a 10-week low against its U.S. counterpart on Wednesday, before
paring some losses, as investors braced for an interest rate
decision by the Bank of Canada.
    After back-to-back interest rate increases in July and
September, the central bank was expected to stay put on
Wednesday as economic data shows the pace of growth slowing in
the third quarter.             
    Tighter mortgage rules slowing the housing market and
uncertainty about the North American Free Trade Agreement could
weigh on the outlook for the economy.
    At 9:29 a.m. ET (1329 GMT), the Canadian dollar          was
trading at C$1.2680 to the greenback, or 78.86 U.S. cents, down
0.1 percent.
    The currency's strongest level of the session was C$1.2669,
while it touched its weakest since Aug. 16 at C$1.2723.    
    The price of oil, one of Canada's major exports, pulled back
from near a four-week high. It had gained ground on Tuesday
after top exporter Saudi Arabia said it was determined to end a
crude glut that has been weighing on the market for three years.
    U.S. crude        prices were down 0.50 percent at $52.21 a
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries after U.S. data
pointed to strong business spending.             
    The two-year            fell 2.5 Canadian cents to yield
1.507 percent and the 10-year             declined 27 Canadian
cents to yield 2.098 percent.
    Canada's 2-year yield fell 1.7 basis points further below
its U.S. equivalent to a spread of -10 basis points.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)