CANADA FX DEBT-C$ weakens as talks to resolve bilateral NAFTA issues drag on

    * Canadian dollar at C$1.3071, or 76.51 U.S. cents
    * Bond prices mixed across flatter yield curve

    TORONTO, Aug 23 (Reuters) - The Canadian dollar fell against
its U.S. counterpart on Thursday, retreating from a two-week
high the day before, as the greenback broadly rose and
resolution of bilateral issues in talks to revamp the NAFTA
trade pact remained elusive.
    Mexico and the United States are close to resolving
remaining bilateral issues in the renegotiation of the North
American Free Trade Agreement, officials said on Wednesday, but
hopes of squaring away differences were booted to at least later
this week.             
    Canada, which sends about 75 percent of its exports to the
United States, is also part of NAFTA. Its economy could benefit
if resolution of issues between Mexico and the United States
leads to a trilateral deal.    
    The U.S. dollar        rose against a basket of major
currencies to snap its recent losing streak. It was boosted by
political uncertainty, a new round of trade tariffs and the
Federal Reserve's latest policy meeting minutes that signaled a
September rate rise.             
    At 9:10 a.m. (1310 GMT), the Canadian dollar          was
trading 0.5 percent lower at C$1.3071 to the greenback, or 76.51
U.S. cents. It traded in a range of C$1.2994 to C$1.3081.
    On Wednesday, the loonie touched its strongest in two weeks
at C$1.2987 as optimism grew of progress in negotiations on
NAFTA and oil prices jumped.
    The price of oil, one of Canada's major exports, slipped on
Thursday as an escalating trade dispute between the United
States and China outweighed news of a decline in U.S. commercial
crude inventories.             
    U.S. crude        prices were down 0.3 percent at $67.63 a
    Canadian government bond prices were mixed across a flatter
yield curve, with the 10-year             rising 10 Canadian
cents to yield 2.246 percent.
    The gap between the two-year and 10-year yields shrank by
1.4 basis points to a spread of 13.4 basis points, its narrowest
since October 2007.

 (Reporting by Fergal Smith
Editing by Susan Thomas)