* Canadian dollar falls against the greenback

* Trades in a range of 1.3870 to 1.3933

* Canada's trade deficit widens to C$5.74 billion in

February

* Bond yields move lower across the curve

By Fergal Smith

TORONTO, April 2 (Reuters) - The Canadian dollar

weakened against its U.S. counterpart on Thursday as optimism

faded that the war in the Middle East might end soon and data

showed an unexpected widening in Canada's trade deficit.

The loonie was trading 0.4% lower at 1.3925 per U.S.

dollar, or 71.81 U.S. cents, after moving in a range of 1.3870

to 1.3933. The currency on Tuesday touched nearly a four-month

low at 1.3966.

Dozens of countries are seeking ways to restart vital energy

shipments through the Strait of Hormuz after U.S. President

Donald Trump vowed in a speech late on Wednesday to deliver more

aggressive strikes on Iran, pushing oil prices back up.

"CAD is weakening in line with broad USD strength after

Trump's remarks, which indicate that the war can be extended and

there is room for further escalation," said Jayati Bharadwaj, a

global FX strategist at TD Securities.

"While Canada is a net oil exporter and the moves in oil

prices are less penalizing than for other countries, the

safe-haven bid in the dollar is overpowering."

The U.S. dollar rose against a basket of major

currencies. U.S. West Texas Intermediate crude oil futures

were trading 8.7% higher at $108.79 a barrel while Brent

crude futures were up 4.8% at $106.03.

Canada's trade deficit widened to C$5.74 billion ($4.12 billion)

in February from an upwardly revised C$4.18 billion in the prior

month, as a surge in gold purchases abroad pushed imports to a

record high. Analysts had forecast a deficit of C$2.25 billion.

"Net trade will likely be a negative for Q1 GDP due to the

surge in imports," Andrew Grantham, a senior economist at CIBC

Capital Markets, said in a note. "However, that's also likely a

sign of restocking following the inventory drawdown that was a

large drag on GDP in the previous quarter."

Canadian bond yields moved lower across a flatter curve,

with the 10-year down 4.8 basis points at 3.455%.