CANADA FX DEBT-C$ has biggest slide in a month as oil prices slump

 (New throughout, updates prices, market activity)
    * Canadian dollar at C$1.2975, or 77.07 U.S. cents
    * Loonie touches its weakest since May 8 at C$1.2988
    * Oil prices fall 4 percent
    * Bond prices higher across a flatter yield curve

    By Fergal Smith
    TORONTO, May 25 (Reuters) - The Canadian dollar weakened to
a more than two-week low against its U.S. counterpart on Friday,
pressured by a nearly $3 drop in the price of oil and broader
gains for the greenback.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.7 percent lower at C$1.2975 to the greenback, or 77.07
U.S. cents, its biggest decline since April 20. The currency
touched its weakest level since May 8 at C$1.2988.
    "Today's move mostly had to do with the pressure on oil,"
said Ronald Simpson, managing director, global currency analysis
at Action Economics.    
    The price of oil, one of Canada's major exports, tumbled
after Saudi Arabia and Russia discussed easing supply curbs that
have helped push crude prices to their highest since 2014.
    U.S. crude oil futures        settled 4 percent lower at
$67.88 a barrel, while the U.S. dollar        climbed against a
basket of major currencies as rising bond yields in Italy and
brewing political instability in Spain weighed on the euro.
    Speculators have boosted bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of May 22, net short
positions had increased to 26,212 contracts from 23,656 a week
    For the week, the loonie fell 0.7 percent. On Thursday, it
had been pressured by the potential imposition of U.S. auto
tariffs, after the Trump administration launched a national
security investigation into car and truck imports.             
    Canada is a major exporter of autos to the United States so
its economy could be hurt by U.S. auto tariffs.
    Uncertain trade policy, including renegotiation of the North
American Free Trade Agreement, and indebted consumers will
encourage the Bank of Canada to leave its policy interest rate
on hold at 1.25 percent next week, a Reuters poll predicted.
    But Action Economics and some other forecasters expect the
Bank of Canada, which has raised interest rates three times
since last summer, to hike at the subsequent policy decision in
July. That would help narrow the gap between Canadian and U.S.
rates and boost the Canadian dollar, Simpson said.
    There is about a 40-percent chance of concluding the
renegotiation of NAFTA before Mexico's presidential election on
July 1, Mexican Economy Minister Ildefonso Guajardo said.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries, with the 10-year
            rising 56 Canadian cents to yield 2.348 percent.

 (Reporting by Fergal Smith; Editing by David Gregorio)