CANADA FX DEBT-C$ dips as oil falls, investors weigh NAFTA talks

    * Canadian dollar at C$1.2679, or 78.87 U.S. cents
    * The price of oil falls 0.5 percent
    * Bond prices higher across a flatter yield curve
    * Canada's 10-year yield hits a 1-month low at 2.225 percent

    TORONTO, Feb 26 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday as oil prices fell and
investors weighed talks to revamp the NAFTA trade pact.
    Mexico and Canada aim to finish reworking less contentious
chapters of the North American Free Trade Agreement with the
United States in new talks that began on Sunday, hoping to clear
the path for a breakthrough on the toughest issues before
upcoming elections.             
    Canada sends about 75 percent of its exports to the United
    The price of oil, one of Canada's major exports, slipped but
still held close to its highest since early February, supported
by comments from Saudi Arabia that it would continue to curb
    U.S. crude        prices were down 0.5 percent at $63.26 a
    At 9:04 a.m. EST (1404 GMT), the Canadian dollar         
was trading 0.2 percent lower at C$1.2679 to the greenback, or
78.87 U.S. cents.
    The currency traded in a range of C$1.2615 to C$1.2682. On
Thursday, it touched its weakest in two months at C$1.2760.
    Speculators cut bullish bets on the Canadian dollar for the
second straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed on Friday. As
of Feb. 20, net long positions had fallen to 23,127 contracts
from 32,529 a week earlier.
    Also on Friday, domestic data showed stronger-than-expected
inflation in January. But other recent data, including
manufacturing shipments, wholesale trade and retail sales have
pointed to a slowdown in growth at the end of 2017.
    Figures for Canada's fourth-quarter economic growth will be
released on Friday, with analysts expecting the annualized rate
will come in below the Bank of Canada's 2.5 percent forecast.
    The U.S. dollar        was little changed against a basket
of major currencies ahead of Federal Reserve Chairman Jerome
Powell's first congressional testimony on Tuesday.             
    Canadian government bond prices were higher on Monday across
a flatter yield curve in sympathy with U.S. Treasuries. The
two-year            rose 1 Canadian cent to yield 1.778 percent
and the 10-year             climbed 17 Canadian cents to yield
2.225 percent, its lowest since Jan. 23.
    The Canadian government will release its latest federal
budget on Tuesday. Markets will get updated forecasts on the
size of the deficit and will look for any planned return to

 (Reporting by Fergal Smith; Editing by David Gregorio)