U.S. Markets closed

CANADA FX DEBT-C$ tumbles to 5-week low ahead of Trump speech

(Adds analyst comments and updates prices) * Canadian dollar ends at C$1.3281, or 75.30 U.S. cents * Loonie touches its weakest since Jan. 23 at C$1.3314 * Bond prices higher across the yield curve * Canada-U.S. 2-year spread touches -50 basis points By Fergal Smith TORONTO, Feb 28 (Reuters) - The Canadian dollar hit a five-week low against its U.S. counterpart on Tuesday, pressured by position adjustment ahead of a speech from U.S. President Donald Trump in the evening and the Bank of Canada's interest rate decision on Wednesday.

Economists expect the Bank of Canada to leave its policy rate on hold at 0.50 percent. In January, Bank of Canada Governor Stephen Poloz said an interest rate cut was still possible depending on risks.

"I don't think he will backtrack on that yet," said Patrick O'Toole, vice president, global fixed income at CIBC Asset Management.

"The Canadian economy is doing ok, but there is still a lot of uncertainty." Risks mentioned by the central bank in January include "material consequences" if Trump enacts protectionist policies.

Trump's address to a joint session of Congress is expected to preview some elements of his tax and spending plans.

A border adjustment tax is part of a tax revamp proposed by House Republicans. If it is implemented, the loonie would be among the biggest losers, analysts say.

"What we have seen today is a combination of technicals, flows, and probably some Canadian dollar long liquidation," said Shaun Osborne, chief currency strategist at Scotiabank.

Speculators increased bullish bets on the Canadian dollar to the most since May, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday.

Given the difference in U.S. and Canadian short term yields, the Canadian dollar should be significantly lower, Osborne said.

Canada's 2-year yield fell 5.8 basis points further below its U.S. equivalent to leave a spread of -50 basis points, while U.S. crude oil futures settled 4 cents lower at $54.01 a barrel.

Oil is one of Canada's major exports.

The Canadian dollar ended at C$1.3281 to the greenback, or 75.30 U.S. cents, much weaker than Monday's close of C$1.3163, or 75.97 U.S. cents.

The currency's strongest level of the session was C$1.3164, while it touched its weakest since Jan. 23 at C$1.3314.

For the month, the loonie lost 2 percent.

Canadian capital spending on non-residential tangible assets is anticipated to edge up 0.8% in 2017 following two consecutive annual declines, Statistics Canada said.

Canadian producer prices rose by 0.4 percent in January.

Canadian government bond prices were higher across a flatter yield curve, with the two-year up 0.5 Canadian cent to yield 0.76 percent and the 10-year rising 12 Canadian cents to yield 1.634 percent.

(Reporting by Fergal Smith; Editing by Lisa Von Ahn and Sandra Maler)