* Canadian dollar at C$1.2985, or 77.01 U.S. cents
* Bond prices higher across yield curve
* Canada-U.S. 2-year spread hits widest in over a year
By Fergal Smith
TORONTO, June 11 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday after U.S. President Donald Trump, who has threatened to scrap the NAFTA trade pact, lashed out at Canadian Prime Minister Justin Trudeau in their feud over trade.
Trump fired off a volley of tweets venting anger at NATO allies, the European Union and Trudeau himself in the wake of a divisive G7 leaders' summit over the weekend. tweeted on Saturday that Trudeau's remarks at a news conference, where he said Canada would not be pushed around, "were very dishonest and weak."
"I think it is all about G7," said Mark McCormick (NYSE:MKC), North American head of FX Strategy at TD Securities. "You have the lingering uncertainties over NAFTA ... you still have room now for Trump to walk away."
The loonie has been pressured recently by new U.S. tariffs on steel and aluminum imports as well as slow-moving talks to modernize the North American Free Trade Agreement, known as NAFTA.
Canada sends about 75 percent of its exports to the United States and its economy would be hit hard if NAFTA were scrapped.
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading 0.4 percent lower at C$1.2985 per greenback, or 77.01 U.S. cents. The currency traded in a range of C$1.2957 to C$1.3027.
Losses for the loonie came after data on Friday showed the Canadian economy unexpectedly shed jobs in May. Still, wages rose at their strongest annual pace in nearly six years, which could give the central bank room to raise interest rates as soon as July. have added to bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of June 5, net short positions rose to 16,039 contracts from 15,690 a week earlier.
The price of oil, one of Canada's major exports, rose even as comments from the Iraqi oil minister cast doubt as to whether OPEC would decide to boost output at its upcoming meeting. crude oil futures CLc1 settled 0.6 percent higher at $65.05 a barrel. O/R
Canadian government bond prices were higher across the yield curve, with the two-year CA2YT=RR up 3.5 Canadian cents to yield 1.907 percent and the 10-year CA10YT=RR rising 13 Canadian cents to yield 2.308 percent.
The gap between Canada's 2-year yield and its U.S. equivalent widened by 4.7 basis points to a spread of -61.7 basis points, its widest since May 2017.