* C$ drops as low as $1.0251, lowest point since March 2
* Bond prices rise on safe-haven demand
* Canada trade surplus C$116 mln, much less than forecast
* Oil futures fall, U.S. dollar gains on euro zone worries
By Ka Yan Ng
TORONTO, March 10 (Reuters) - Canada's dollar fell to a one-week low against the greenback on Thursday morning as oil prices dropped and data showed the country's trade surplus narrowed more than expected in January.
The Canadian dollar CAD=D4 dropped as low as C$0.9755 to the U.S. dollar, or $1.0251, as Canada's trade surplus fell to C$116 million in January from a downwardly revised C$1.7 billion surplus in December. Analysts surveyed by Reuters had, on average, forecast a trade surplus of C$2.6 billion. [ID:nSCLAEE7A2]
"The trade numbers were a great deal worse than expected. Our economic data is still sort of mixed. I would think that not many people are expecting a midyear (interest) rate hike anymore," said John Curran, senior vice president at CanadianForex.
"We bottomed out yesterday near trend-line support, and with numbers like that, sure, it's time to rethink your Canadian dollar positioning for the medium term."
At 9:45 a.m. (1445 GMT), the Canadian dollar was at C$0.9753 to the U.S. dollar, or $1.0253, down from Wednesday's close of C$0.9687 to the U.S. dollar, or $1.0323.
The trade figures firmed up market expectations that the Bank of Canada will stand pat on interest rates on its April 12 policy-setting date. Based on overnight index swaps, markets are pricing in a 91.26 percent probability of no change in rates, up from 90.60 percent just ahead of the trade data, according to a Reuters calculation.
The market is not fully pricing in a hike until the central bank's September policy-setting date.
Analysts said the details of the trade report were stronger than the disappointing headline.
"The trade balance stayed in surplus - just barely - for the second straight month after nine months in deficit," said Jonathan Basile, economist at Credit Suisse, noting that exports and imports are "starting Q1 on a very strong note... indicative of strong global and Canadian domestic activity."
Other factors hurting the Canadian dollar on Thursday included a slide in U.S. crude oil prices and safe-haven buying of the U.S. dollar. That safe-haven move was in line with stock market declines spurred by a Moody's downgrade of Spanish debt, which reignited worries over the euro zone debt crisis.
The risk-off sentiment sent Canadian government bond prices higher across the curve.
The two-year bond CA2YT=RR was up 2 Canadian cents to yield 1.872 percent, while the 10-year bond CA10YT=RR rose 6 Canadian cents to yield 3.392 percent. (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama and Peter Galloway)