* Canadian dollar at C$1.2704, or 78.72 U.S. cents
* Bond prices lower across a steeper yield curve
TORONTO, Aug 14 (Reuters) - The Canadian dollar weakened on Monday against its U.S. counterpart as oil prices fell and the greenback posted broader gains, while investors awaited the start of renegotiations of the NAFTA trade pact this week. Prices of oil, one of Canada's major exports, fell as a slowdown in Chinese refining raised concerns about demand for crude in the Asian country.
The U.S. dollar edged higher against a trade-weighted
basket of currencies after posting its biggest weekly drop in three weeks as expectations of U.S. interest rate increases dwindled further after weak inflation data.
U.S. crude prices were down 0.45 percent at $48.60 a
barrel. The Canadian government's goals for talks on modernizing the North American Free Trade Agreement include preserving the pact's dispute-settlement mechanism, Foreign Minister Chrystia Freeland said, setting up a potential clash with the United States.
At 9:16 a.m. ET (1316 GMT), the Canadian dollar was
trading at C$1.2704 to the greenback, or 78.72 U.S. cents, down 0.2 percent. The currency traded in a range of C$1.2675 to C$1.2716. On Friday, the loonie touched its weakest in four weeks at C$1.2753. Still, speculators have increased bullish bets on the loonie to the highest level since January 2013, according to data from the U.S. Commodity Futures Trading Commission and Reuters calculations on Friday. Canadian dollar net long positions rose to 62,821 contracts as of Aug. 8 from 40,638 contracts a week earlier. Tension on the Korean peninsula eased slightly and risk-sensitive assets, such as stocks, rallied as U.S. officials played down the risk of an imminent war. As a major commodity producer, Canada could be hurt if geopolitics hamper global trade. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries, as investor demand weakened for low-risk government debt. The two-year fell 3.5 Canadian cents to yield 1.229 percent and the 10-year declined 35 Canadian cents to yield 1.893 percent.
Canada's inflation report for July is due on Friday.
(Reporting by Fergal Smith; Editing by W Simon)