Canadian dollar hits 7-week low as oil falls, greenback climbs

TORONTO (Reuters) - The Canadian dollar weakened to a nearly seven-week low against its U.S. counterpart on Tuesday, with the currency breaking out of its recent holding pattern as oil prices fell and the greenback broadly gained.

U.S. and Canada Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

At 4 p.m. EST (2000 GMT), the Canadian dollar CAD=D4 was trading 0.5 percent lower at C$1.2952 to the greenback, or 77.21 U.S. cents.

“It’s a big dollar move,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “We had resistance right around 1.2900. When we broke that we nearly got to 1.3000.”

The currency hit its weakest level since March 21 at C$1.2998, while the U.S. dollar .DXY surged to a 2018 high against a basket of major currencies.

The price of oil, one of Canada’s major exports, recouped some losses after U.S. President Donald Trump confirmed the U.S. will withdraw from the Iran nuclear deal, in a volatile session in which prices slumped as much as 4 percent earlier in the day.

U.S. crude oil futures CLc1 settled $1.67 lower at $69.06 a barrel.

Losses for the loonie came as investors weighed prospects for the North American Free Trade Agreement (NAFTA).

Canadian, Mexican and U.S. officials hailed progress on revamping NAFTA as efforts focused on crafting new rules for the auto sector, but there was no sign of a major breakthrough.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR dipped 3.5 Canadian cents to yield 1.934 percent and the 10-year CA10YT=RR declined 18 Canadian cents to yield 2.348 percent.

Canadian housing starts declined in April to a seasonally adjusted annual rate of 214,379 units as builders responded to slowing sales in Toronto, Canada’s largest city, data from the Canada Mortgage and Housing Corporation showed on Tuesday.

Canada’s jobs report for April is due on Friday.

Reporting by Fergal Smith; Editing by Sandra Maler