CANADA FX DEBT-Canadian dollar hits six-week low after China trade deal

By Fergal Smith

TORONTO, Jan 16 (Reuters) - The Canadian dollar weakened to a six-week low against its U.S. counterpart on Friday as investors weighed a trade deal between Canada and China as well as the prospect of one of the most dovish candidates being passed over as the next Federal Reserve chair.

The loonie CAD= was trading 0.2% lower at 1.3915 per U.S. dollar, or 71.86 U.S. cents, after touching its weakest intraday level since December 5 at 1.3928. For the week, the currency was little changed.

U.S. President Donald Trump praised economic adviser Kevin Hassett at a White House event and said he may want to keep him in his current role, as the president considers his nominee for the next Federal Reserve chair.

"The U.S. dollar is picking up a little bit of ground today on the back of Trump saying that Hassett is going to stay in the White House and not get tapped for Fed Chair," said Shaun Osborne, chief currency strategist at Scotiabank. "Hassett is perceived to be the most dovish of the likely candidates at this point."

Canada and China have struck an initial trade deal that will slash tariffs on electric vehicles and canola, Prime Minister Mark Carney said, as both nations promised to tear down trade barriers while forging new strategic ties.

"There's a fair bit of speculation that this might be something that the U.S. isn't going to be particularly keen on," Osborne said.

Trump administration officials said Canada would regret its decision to allow China to import up to 49,000 Chinese EVs, and that those cars would not be allowed to enter the United States.

The price of oil CLc1, one of Canada's major exports, settled 0.4% higher at $59.44 a barrel on lingering worries over supply risks.

Domestic data showed that housing starts increased 11% in December from November at a seasonally adjusted annualized rate, beating estimates.

The Canadian 10-year CA10YT=RR was up 2.2 basis points at 3.376% as U.S. Treasury yields climbed.