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CANADA FX DEBT-C$ recovers from three-week low on reports of metals tariffs deal

Fergal Smith

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* Canadian dollar rises 0.1% against the greenback

* Loonie hits weakest level since April 25 at 1.3514

* For the week, the Canadian dollar declines 0.3%

* Canadian bond prices dip across a flatter yield curve

TORONTO, May 17 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Friday, recovering from an earlier three-week low after reports that a deal was reached to remove tariffs on its metals that had been imposed by the United States. U.S. officials have agreed to remove tariffs on steel and aluminum imported from Canada and Mexico in 48 hours, paving the way for the three North American counties to enact a new trade pact, the Washington Post and Politico reported. "At least we have more certainty in the North American region," said Michael Goshko, corporate risk manager at Western Union Business Solutions. "A country as trade dependent as Canada needs all the good news it can get at the moment." Canada sends about 75% of its exports to the United States, including oil. Oil prices dipped but were on track for a weekly gain on rising concerns over potential further supply disruptions in Middle East shipments due to U.S.-Iran political tensions. U.S.

crude prices were down 0.2% at $62.77 a barrel.At 1:02 p.m. (1702 GMT), the Canadian dollar was

trading 0.1% higher at 1.3457 to the greenback, or 74.31 U.S. cents. Earlier in the session the loonie touched its weakest level since April 25 at 1.3514 as investors became more worried about the trade war between the United States and China. Canada runs a current account deficit so its economy could be hurt by a slowdown in the global flow of capital or trade. For the week, the loonie was down 0.3%. Canadian government bond prices were lower across a flatter

yield curve, with the two-year down 4 Canadian centsto yield 1.608% and the 10-year declining 10

Canadian cents to yield 1.689%. The gap between the 2- and 10-year yields narrowed by 1.1 basis points to a spread of 8.1 basis points in favor of the longer-dated bond. Canada's interest rate markets are due to close early ahead of the Victoria Day holiday on Monday.

(Reporting by Fergal Smith Editing by Nick Zieminski and Phil Berlowitz)