* Canadian dollar at C$1.3451, or 74.34 U.S. cents
* Loonie touches its weakest since March 15 at C$1.3455
* Bond prices slightly higher across the yield curve
* 10-year yield touches a four-month low at 1.545 percent
By Fergal Smith
TORONTO, April 4 (Reuters) - The Canadian dollar weakened on Tuesday to a nearly three-week low against its U.S. counterpart, pressured by a loss of risk appetite and domestic data showing an unexpected trade deficit.
Following three consecutive months of surpluses, February's C$972 million deficit compared with economists' expectations for a surplus of C$500 million. Exports tumbled by the most in nearly a year, dampened by a decrease in shipments of aircraft and canola. drop in exports will embolden the Bank of Canada to not put too much weight on a recent strong run of domestic data when it makes its interest rate decision next week, said Nick Exarhos, economist at CIBC Capital Markets.
"They are likely to continue to highlight that we are starting from a position of economic slack.
Risk aversion helped support the yen at the expense of commodity-linked currencies, such as the Canadian dollar, that tend to underperform when investors turn less optimistic about the economic outlook. for risk has been curtailed by market nerves ahead of a meeting between U.S. President Donald Trump and Chinese President Xi Jinping and following Monday's suspected suicide bombing in St. Petersburg, Russia.
At 9:21 a.m. ET (1321 GMT), the Canadian dollar CAD=D4 was trading at C$1.3451 to the greenback, or 74.34 U.S. cents, weaker than Monday's close of C$1.3386, or 74.70 U.S. cents.
The currency's strongest level of the session was C$1.3374, while it touched its weakest since March 15 at C$1.3455.
Losses for the Canadian dollar came even as prices of oil, one of Canada's major exports, rose.
U.S. crude CLc1 prices were up 0.58 percent at $50.53 a barrel as a rebound in Libyan crude production balanced expectations of a draw in U.S. crude oil and product inventories. Monday, dealers speculated that there had been mergers and acquisitions-related buying of U.S. dollars against the loonie.
Last week, ConocoPhillips (NYSE:COP) COP.N agreed to sell oil sands and western Canadian natural gas assets to Calgary-based Cenovus Energy Inc CVE.TO for C$17.7 billion.
Canadian government bond prices were slightly higher across the yield curve, with the two-year CA2YT=RR up 1 Canadian cent to yield 0.721 percent and the 10-year CA10YT=RR rising 13 Canadian cents to yield 1.552 percent.
The 10-year yield touched its lowest intraday since Nov. 30 at 1.545 percent.