* Canadian dollar at C$1.2823, or 77.98 U.S. cents
* Loonie touches weakest since Dec. 19 at C$1.2895
* Bond prices higher across yield curve
* 10-year yield touches six-week low at 2.170 percent
By Fergal Smith
TORONTO, March 1 (Reuters) - The Canadian dollar edgedhigher against its U.S. counterpart on Thursday, recovering froman earlier 10-week low as the greenback broadly fell andinvestors weighed prospects of a more protectionist tradeenvironment.
The dollar .DXY turned lower against a basket of majorcurrencies on fears of an imminent trade war after PresidentDonald Trump said the United States would impose tariffs onsteel and aluminum. will retaliate if the United States imposes tariffson Canadian steel and aluminum products, Foreign AffairsMinister Chrystia Freeland said. are seeing Trump as being antagonistic towardtrade," said Colin Cieszynski, chief market strategist SIAWealth Management.
The potential tariffs on steel and aluminum raises doubtabout U.S. willingness to come to "any reasonable deal" onNAFTA, Cieszynski said.
Trump has repeatedly threatened to walk away from the NorthAmerican Free Trade Agreement between the United States, Canadaand Mexico unless major changes are made. Canada sends about 75percent of its exports to the United States.
At 4 p.m. EST (2100 GMT), the Canadian dollar CAD=D4 wastrading 0.1 percent higher at C$1.2823 to the greenback, or77.98 U.S. cents.
The currency's strongest level of the session was C$1.2809,while it touched its weakest since Dec. 19 at C$1.2895.
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. 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. domestic separate data, auto sales rose 2 percent inFebruary from a year earlier and a measure of manufacturingbusiness conditions declined. 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 as stocks fell on Trump'stariff plan, while Federal Reserve Chairman Jerome Powell toldU.S. lawmakers that there was scant evidence of the economyoverheating. 10-year CA10YT=RR rose 46 Canadian cents to yield2.176 percent. It touched its lowest intraday since Jan. 17 at2.170 percent.