CANADA FX DEBT-Canadian dollar approaches December low on tariff concern

By Fergal Smith

TORONTO, Jan 17 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, with the currency approaching a multi-year low it hit in December as the looming U.S. presidential inauguration focused attention on expected trade tariffs.

The loonie CAD= was trading 0.5% lower at 1.4460 per U.S. dollar, or 69.16 U.S. cents, after trading in a range of 1.4383 to 1.4464. Last month, it touched its weakest level in nearly five years at 1.4467.

"The CAD is trading close to its recent low against the USD into the end of the week," Shaun Osborne, chief currency strategist at Scotiabank, said in a note. "The soft performance indicates that investors remain deeply concerned about what the next week - and those that follow - will bring."

Canada is ready to respond to tariffs from its top trade partner the United States on Monday if President-elect Donald Trump, who takes office that day, follows through on his threat to impose them, Foreign Minister Melanie Joly said.

Investors were also awaiting the Bank of Canada's fourth-quarter Business Outlook Survey on Monday, which could offer clues on the prospects of an additional interest rate cut by the central bank later this month.

The BoC will communicate more clearly and improve its forecasting models to help predict future shocks, it said, after publishing a review of the steps taken to tackle the pandemic.

The U.S. dollar .DXY strengthened against a basket of major currencies, adding to the gains it made in recent weeks as U.S. Treasury yields climbed, and the price of oil, one of Canada's major exports, settled 1.7% lower at $78.68 a barrel.

Canadian bond yields fell across a flatter curve. The 10-year CA10YT=RR was down 4.1 basis points at 3.301%, after earlier touching its lowest level since Jan. 7 at 3.291%.

(Reporting by Fergal Smith in Toronto; Editing by Nia Williams)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))