* U.S. dollar down 0.1 percent vs Canada
* Trumps says may do bilateral deals with Canada, Mexico
* Spread between the U.S.-Canadian 10-year yields widens
By Gertrude Chavez-Dreyfuss
July 18 (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday, reversing earlier losses, after President Donald Trump said he may negotiate separate trade deals with Mexico and Canada.
This is not the first time that Trump had suggested bilateral deals with Mexico and Canada, as he vowed to revamp the 24-year old North American Free Trade Agreement (NAFTA). Analysts said Trump first brought up the idea back in May and June, but Canada and Mexico stuck together.
On Wednesday, Trump repeated it again.
"We have had very good sessions with Mexico and with the new president of Mexico, who won overwhelmingly, and we're doing very well on our trade agreement," Trump told reporters ahead of a meeting of his cabinet at the White House.
"So we'll see what happens. We may do a deal separately with Mexico and we'll negotiate with Canada at a later time. But we're having very good discussions with Mexico." Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said Trump's comments suggested that "he's hungry for a deal and a deal (NAFTA) is much closer than what we have presupposed."
"If Trump thinks he could get a deal with Mexico, it kind of says he has a weaker hand," Anderson added.
In afternoon trading, the U.S. dollar was down 0.1 percent at C$1.3177 CAD=D3 against the Canadian unit. So far this year, the Canadian dollar has been down 4.7 percent against a strong U.S. currency.
The U.S. dollar, however, was still up 0.2 percent on the day against a basket of six major currencies at 95.075 .DXY .
The Canadian dollar, meanwhile, reversed earlier losses against the euro, which fell 0.3 percent to C$1.5341 EURCAD= . Sterling also extended losses, falling 0.6 percent to C$1.7206 GBPCAD= .
Weaker commodity prices earlier pressured the Canadian dollar, a commodity-based currency, but U.S. crude futures recovered in the afternoon session, trading up 1.2 percent at $68.93 per barrel CLc1 .
Meanwhile, Canadian government bond prices were lower across the curve and yields were higher in line with U.S. Treasuries.
The two-year yield CA2YT=RR rose to 1.930 percent, compared with 1.918 percent late on Tuesday, while the 10-year CA10YT=RR was up at 2.141 percent from Tuesday's 2.123 percent.
The spread between the U.S. 10-year Treasury and Canadian 10-year yields has widened on Wednesday to nearly 76 basis points US10CA10=RR . The yield gap has been widening since the beginning of the year in favor of the U.S. dollar.