(Adds portfolio manager quotes, details throughout; updatesprices)
* Canadian dollar at C$1.2829, or 77.95 U.S. cents
* Loonie touches weakest since Dec. 20 at C$1.2841
* Oil falls 2.2 percent
* Bond prices higher across flatter yield curve
By Fergal Smith
TORONTO, Feb 28 (Reuters) - The Canadian dollar weakened toa nearly ten-week low against its U.S. counterpart on Wednesdayand was on track to post its biggest monthly decline since theAlberta wildfire, one day after Ottawa balked at a response toU.S. tax reform.
At 4:30 p.m. EST (2100 GMT), the Canadian dollar CAD=D4 was trading 0.4 percent lower at C$1.2829 to the greenback, or77.95 U.S. cents. It touched its lowest since Dec. 20 atC$1.2841.
For the month, the loonie was down 4.2 percent, thecurrency's worst performance since wildfires ripped throughAlberta's oil sands region in May 2016. Oil is one of Canada'smajor exports.
Finance Minister Bill Morneau's third budget, released onTuesday, outlined slight deficit improvements without much inthe way of new spending, refusing to blink in the face of U.S.corporate tax cuts that could hurt Canada's competitiveness andan uncertain outlook for the North American Free TradeAgreement. "Some people in the market expected some kind of a responsefrom our government and they didn't get that," said HosenMarjaee, senior managing director, Canadian fixed income atManulife Asset Management. "It seems like going forward we don'thave a lot going for us in terms of engines of growth."
The pace of capital expenditures in Canada is expected tocool in 2018 as a slowdown in spending intentions from thepublic sector are offset by increased investment in machineryand equipment, data from Statistics Canada showed. 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.
Losses for the loonie came as the U.S. dollar .DXY climbedto a five-week high against a basket of major currencies. Thegreenback was buoyed by an upbeat assessment of the U.S. economyfrom the Federal Reserve's new chairman. FRX/
U.S. crude oil futures CLc1 settled 2.2 percent lower at$61.64 a barrel after data showing a build in U.S. crudeinventories. government bond prices were higher across a flatteryield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 3.5 Canadian cents to yield 1.787 percent andthe 10-year CA10YT=RR climbed 28 Canadian cents to yield 2.236percent.
Canada is cutting down issuance of bonds in the 2018-19fiscal year by 17 percent as the government runs a smallerbudget deficit and market participants demand greater supply ofmore liquid T-bills.