* Canadian dollar at C$1.3334, or 75.00 U.S. cents
* Loonie touches its weakest since Jan. 20 at C$1.3346
* Bond prices lower across the yield curve
* Canada-U.S. 2-year spread hits largest gap since January 2016
TORONTO, March 1 (Reuters) - The Canadian dollar weakened on Wednesday to a fresh five-week low against its U.S. counterpart ahead of a Bank of Canada interest rate decision, pressured by increased chances of a Federal Reserve interest rate hike in March.
The U.S. dollar .DXY rallied against a basket of major currencies after hawkish comments from two of the Fed's top officials overshadowed U.S. President Donald Trump's first major policy speech to Congress. of a Fed rate hike this month rose to 71 percent from 35 percent the day before, according to the CME Group's (NASDAQ:CME) FedWatch tool.
In contrast, economists expect the Bank of Canada to leave its policy rate on hold at 0.50 percent on Wednesday and further wait until the second quarter of next year before hiking. CA/POLL
In January, the central bank said an interest rate cut was still possible depending on risks, including "material consequences" if Trump enacts protectionist policies.
Trump did not comment on the most pressing tax issue facing Congress, a proposed border adjustment tax to boost exports over imports. Canadian dollar would be among the biggest losers if the border tax were implemented, analysts say. 9:18 a.m. ET (1418 GMT), the Canadian dollar CAD=D4 was trading at C$1.3334 to the greenback, or 75.00 U.S. cents, weaker than Tuesday's close of C$1.3281, or 75.30 U.S. cents.
The currency's strongest level of the session was C$1.3285, while it touched its weakest since Jan. 20 at C$1.3346.
Losses for the commodity-linked Canadian dollar came even as factory data from China and the euro zone added to signs that the global economy is regaining momentum. crude CLc1 prices were up 0.48 percent at $54.27 a barrel as investors took heart from strict Organization of the Petroleum Exporting Countries compliance with its pledge to cut output. is one of Canada's major exports.
In domestic data, the current account deficit narrowed sharply in the fourth quarter to C$10.73 billion, its lowest in more than five years. government bond prices were lower across the yield curve in sympathy with Treasuries.
The two-year CA2YT=RR price fell 5.5 Canadian cents to yield 0.787 percent and the 10-year CA10YT=RR tumbled 71 Canadian cents to yield 1.716 percent.
The 2-year yield fell 5.6 basis points further below its U.S. equivalent to a spread of -51.4 basis points, its largest gap since January 2016.