* Canadian dollar at C$1.3005, or 76.89 U.S. cents
* Price of U.S. oil falls 1.5 percent
* Bond prices lower across a steeper yield curve
* 10-year yield hits highest in more than two months
TORONTO, Aug 1 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Wednesday as the currency held onto recent gains ahead of a Federal Reserve interest rate decision, despite the potential for escalated global trade tensions.
A source said the White House was about to propose higher tariffs on $200 billion in Chinese imports, perhaps sparking a new round of trade hostilities. runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows. The country has its own trade feud with the United States and is also in talks with the U.S. and Mexico to revamp the North American Free Trade Agreement.
Mexican negotiators are optimistic about the possibility of getting a NAFTA deal and are hopeful of progress in coming days, the country's deputy economy minister said ahead of a second ministerial meeting in Washington later this week. Federal Reserve is expected to keep interest rates unchanged but solid economic growth combined with rising inflation are likely keep it on track for another two hikes this year. 9:11 a.m. EDT (1311 GMT), the Canadian dollar CAD=D4 , which rose 1 percent in July, was trading near flat at C$1.3005 to the greenback, or 76.89 U.S. cents. The currency traded in a narrow range of C$1.3000 to C$1.3034.
On Wednesday, the loonie touched its strongest in nearly seven weeks at C$1.2985 after data showing stronger-than-expected growth in the domestic economy boosted bets for another Bank of Canada interest rate hike this year. BOCWATCH
The price of oil, one of Canada's major exports, was pressured by an industry report that U.S. stockpiles of crude rose unexpectedly and by higher OPEC production. U.S. crude oil futures CLc1 were down 1.5 percent at $67.71 a barrel. government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries after the U.S. government said it intends to increase its borrowing from the bond market in the coming quarter to fund its spending and debt obligations. two-year CA2YT=RR fell 3.5 Canadian cents to yield 2.087 percent and the 10-year CA10YT=RR declined 40 Canadian cents to yield 2.357 percent. The 10-year yield touched its highest intraday since May 25 at 2.361 percent.