(Adds analyst quotes, details throughout; updates prices)
* Canadian dollar at C$1.2521, or 79.87 U.S. cents
* Loonie touches its highest since Oct. 6 at C$1.2591
* Bond prices higher across yield curve
* Canada's 2-year yield further below U.S. counterpart
TORONTO, Oct 17 (Reuters) - The Canadian dollar clawed back its losses against the greenback on Tuesday, helped by technical buying, after NAFTA uncertainty had pressured the loonie to its lowest in more than a week.
At 5 p.m. EDT (2100 GMT), the Canadian dollar was
little changed at C$1.2521 to the greenback, or 79.87 U.S. cents. The currency traded in a relatively broad range, with its strongest level of the session was C$1.2514, while it touched its weakest since Oct. 6 at C$1.2591. "It bounced pretty well" after finding support ahead of its October low at C$1.2600, said Adam Button, currency analyst at ForexLive. "Expectations are very low for any kind of NAFTA breakthrough ... the market is expecting someone to walk away from the table before there is any progress." Trade ministers from the United States, Canada and Mexico wrapped up a contentious round of negotiations on the North American Free Trade Agreement dominated by aggressive demands from Washington, including a sunset clause on the pact that Canadian and Mexican officials say will be rejected.
Canada sends about 75 percent of its exports to the United States and its economy could be hurt if a deal to renew NAFTA is not reached. In addition, tougher new rules on mortgage lending finalized Canada's previously red-hot housing market. Still, analysts in a Reuters poll expect the Bank of Canada to hike interest rates for a third time by year-end.
Canadian government bond prices were higher across the yield
curve, with the two-year up 3 Canadian cents to yield 1.512 percent and the 10-year rising 12 Canadian
cents to yield 2.016 percent. The gap between the 2-year yield and its U.S. equivalent, which dropped below parity on Monday for the first time in six weeks, widened by 2.2 basis points to a spread of -3.8 basis points.
(Reporting by Fergal Smith, editing by G Crosse)