* Canadian dollar falls 0.2 against the greenback
* Loonie touches a two-month low at 1.3391
* Price of U.S. oil falls nearly 1 percent
* Bond prices rise across the yield curve
TORONTO, March 6 (Reuters) - The Canadian dollar weakened to a two-month low against its U.S. counterpart on Wednesday ahead of an interest rate decision by the Bank of Canada, as oil prices fell and the government reported a record high trade deficit in December.
The deficit widened to C$4.59 billion from a revised C$1.98 billion in November as slumping crude prices cut the value of exports by 3.8 percent, Statistics Canada said.
The price of oil, one of Canada's major exports, fell as bullish output forecasts by two big U.S. producers and a build in U.S. crude stockpiles outweighed OPEC-led production cuts. U.S. crude oil futures CLc1 were down nearly 1 percent at $56.02 a barrel. Bank of Canada is widely expected to hold rates steady, with the majority of analysts anticipating one more hike in 2019, though recent data has clouded the outlook and could force a more dovish tone. The interest rate decision is due at 10 a.m. (1500 GMT). 8:36 a.m. (1336 GMT), the Canadian dollar CAD=D4 was trading 0.2 percent lower at 1.3383 to the greenback, or 74.72 U.S. cents. The currency touched its weakest level since Jan. 4 at 1.3391.
The decline for the loonie came as China's foreign ministry said that the country's customs officials had frequently discovered "hazardous pests" in samples taken recently from Canadian canola imports. comment came after Reuters reported that China had canceled Canadian agribusiness Richardson International Ltd's registration to ship canola to China, the world's top importer of the oilseed.
Still, currency strategists expect the Canadian dollar to strengthen over the coming year as rising investor appetite for risk counters a slowdown in the domestic economy that could deter the Bank of Canada from raising interest rates, a Reuters poll showed. government bond prices were higher across the yield curve, with the two-year CA2YT=RR up 4.4 Canadian cents to yield 1.715 percent and the 10-year CA10YT=RR rising 26.5 Canadian cents to yield 1.848 percent.
The gap between Canada's 10-year yield and its U.S. equivalent widened by 2.1 basis points to 86.3 basis points in favor of the U.S. bond, the widest gap since January 2016.
Canada's employment report for February is due on Friday.