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CANADA FX DEBT-Canadian dollar lags G10 peers as global trade concerns rise

Fergal Smith

(Adds strategist quote and details on activity; updates prices)

* Canadian dollar weakens 0.1% against the greenback

* Canadian manufacturing activity expands in November

* Price of U.S. oil increases by 1.5%

* Canada's 10-year yield touches a near three-week high at 1.566%

TORONTO, Dec 2 (Reuters) - The Canadian dollar weakened on Monday against its U.S. counterpart and every other G10 currency, as investors worried about a potential escalation of global trade conflicts and awaited a Bank of Canada interest rate decision this week.

Global stock markets , which had been counting on a

"phase one" trade deal this year between the United States and China, fell after U.S. President Donald Trump said he would restore tariffs on some imports from Brazil and Argentina. A drop in new U.S. factory orders in November to their lowest since 2012 deepened the decline. Canada runs a current account deficit and is a major exporter of commodities, including oil, so its economy could be hurt by a reduced flow of global capital or trade. "The concern is how the external climate filters into the domestic economy and that's why the Canadian dollar is on the back foot," said Simon Harvey, FX market analyst for Monex Europe and Monex Canada. The Bank of Canada, which is expected on Wednesday to leave its benchmark interest rate at 1.75%, has expressed concern about global trade uncertainty. The loonie has been pressured since October by a more dovish stance from the central bank.

At 3:20 p.m. (2020 GMT), the Canadian dollar was

trading 0.1% lower at 1.3295 to the greenback, or 75.22 U.S. cents. It lost greater ground against all the other G10 currencies. The loonie, which fell 0.9% in November, traded in a range of 1.3275 to 1.3307. The currency underperformed its peers on Monday despite higher oil prices and improved domestic data. Canadian manufacturing activity expanded in November for the third consecutive month as production climbed at a faster pace and new orders continued to grow, but the momentum was subdued compared with historical levels, data showed. The price of oil, one of Canada's major exports, was supported by hints that OPEC and its allies may agree to deepen output cuts at a meeting this week and as rising manufacturing activity in China suggested stronger demand.

U.S. crude oil futures were up 1.5% at $56.01 a

barrel. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 5 Canadian cents to yield 1.613% and the 10-year was down 68 Canadian cents to yield 1.536%. The 10-year yield touched its highest intraday since Nov. 13 at 1.566%.

(Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney)