* Canadian dollar at C$1.2976, or 77.07 U.S. cents
* Loonie touches its weakest since July 7 at C$1.2982
* Bond prices rise across the yield curve
* 10-year yield touches lowest since Jan. 17 at 2.148percent
TORONTO, March 5 (Reuters) - The Canadian dollar weakened to a nearly eight-month low against its U.S. counterpart on Monday after U.S. President Donald Trump used proposed tariffs on steel and aluminum as a bargaining chip in talks to revamp NAFTA.
Trump is expected to finalize the tariffs later in the week. He appeared to tie possible exemptions for Canada and Mexico to a "new" North American Free Trade Agreement as well as other steps. is the largest supplier of both steel and aluminum to the United States. Its commodity-linked economy could be hurt ifNAFTA were to collapse or if more protectionist trade policies were to lead to a slowdown in global trade.
At 9:18 a.m. EST (1418 GMT), the Canadian dollar CAD=D4 was trading 0.7 percent lower at C$1.2976 to the greenback, or 77.07 U.S. cents. The currency touched its weakest since July 7 at C$1.2982.
Losses for the loonie came after data on Friday showed thatCanada's economy grew by an annualized 1.7 percent in the final quarter of 2017, short of the Bank of Canada's forecast of 2.5 percent.
The central bank is expected to leave its benchmark interestrate on hold at 1.25 percent at a policy announcement onWednesday. Domestic trade data for January is also due onWednesday and the February employment report is due on Friday.
Speculators have cut bullish bets on the Canadian dollar forthe third straight week, data from the U.S. Commodity FuturesTrading Commission and Reuters calculations showed on Friday. Asof Feb. 27, net long positions had fallen to 22,220 contractsfrom 23,127 a week earlier.
The price of oil, one of Canada's major exports, was littlechanged. U.S. crude CLc1 prices were up 0.05 percent to $61.28a barrel. U.S. dollar .DXY rose against a basket of majorcurrencies as an inconclusive election in Italy weighed on theeuro. government bond prices were higher across the yieldcurve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR rose 36 Canadian cents to yield 2.154 percent.
The 10-year yield touched its lowest intraday since Jan. 17at 2.148 percent, while the gap between it and its U.S.equivalent widened by 2 basis points to a spread of -67.8 basispoints, its widest since June 12.