* Canadian dollar at C$1.2849, or 77.83 U.S. cents
* Loonie touches weakest since Dec. 20 at C$1.2865
* Bond prices higher across the yield curve
* 10-year yield touches a six-week low
TORONTO, March 1 (Reuters) - The Canadian dollar weakenedagainst its U.S. counterpart on Thursday, adding to a 10-weeklow as oil prices fell and investors weighed the potentialintroduction of U.S. trade protection measures.
The price of oil, one of Canada's major exports, fell for athird day as rising U.S. inventories, record output and astronger dollar outweighed high compliance by major producerswith a supply-cutting deal. crude CLc1 prices were down 1.72 percent at $60.58 abarrel.
U.S. President Donald Trump tweeted that the U.S. steel andaluminum industries need "free, fair and smart trade" as a U.S.cable channel reported that he will make an announcement ontariffs at 11 a.m. (1600 GMT). has also repeatedly threatened to walk away from theNorth American Free Trade Agreement between the United States,Canada and Mexico unless major changes are made.
Canada sends about 75 percent of its exports to the UnitedStates. Investors worry that a more protectionist tradeenvironment could hurt Canada's economy.
At 10:09 a.m. EST (1509 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at C$1.2849 to the greenback, or77.83 U.S. cents.
The currency's strongest level of the session was C$1.2828,while it touched its weakest since Dec. 20 at C$1.2865.
The loonie posted in February its biggest monthly declinesince the Alberta wildfire, pressured by a Federal budget onTuesday that balked at a response to U.S. tax reform. U.S. dollar .DXY gained ground on Thursday against abasket of major currencies, boosted by U.S. manufacturing dataand potential monetary policy divergence. current account deficit narrowed in the fourthquarter as the country posted a smaller shortfall in the tradeof goods after three consecutive quarters of increases, datafrom Statistics Canada showed. for Canada's fourth-quarter economic growth will bereleased on Friday, with analysts expecting the annualized rateto come in below the Bank of Canada's 2.5 percent forecast.
Canadian government bond prices were higher across the yieldcurve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 2 Canadian cents to yield 1.779 percent and the 10-year CA10YT=RR climbed 18 Canadian cents to yield 2.212 percent.
The 10-year yield touched its lowest intraday since Jan. 17at 2.197 percent.