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TORONTO (Reuters) - The Canadian dollar hit its weakest close in more than two weeks against a broadly higher U.S. counterpart on Tuesday, with falling oil prices and concern about some details of a trade surplus report weighing.
The currency also suffered as investors reassessed the prospect of a faster pace to U.S. interest rate hikes after Philadelphia Federal Reserve Bank President Patrick Harker said late on Monday he would be open to raising rates at the central bank's March meeting if growth in jobs and wages continues.
"Even though he is a known hawk, the fact that he came out and communicated his preference for the three-hike path and maintain that March was a live meeting was enough to wake people up," said Eric Theoret, a currency strategist at Scotiabank.
Prices for oil CLc1LCOc1, a major Canadian export, fell more than 1 percent as growing evidence of a revival in U.S. shale production offset lower output by OPEC and other exporters.
The Canadian dollar CAD=D4 settled at C$1.3167 to the greenback, or 75.95 U.S. cents, much weaker than the Bank of Canada's close on Monday of C$1.3087, or 76.41 U.S. cents and its weakest settlement since Jan. 23.
The currency traded as strong as C$1.3076 early in the session before weakening to as much as C$1.3213.
Canada posted a C$923 million trade surplus in December, thanks largely to booming crude oil exports, Statistics Canada said. November's surplus was also revised sharply higher.
But while overall exports rose by 0.8 percent in December, export volumes actually fell by 1.4 percent.
"On the headline it looks great, when you dig into the details, whether it's the breadth of the export growth or the composition of price versus volume, it doesn't provide as much confidence," Scotia's Theoret said.
The loonie has made strong gains so far this year, but that upsurge will likely peter out over the coming months as an expected widening gap between steady interest rates in Canada and rising U.S. rates eclipses higher oil prices, a Reuters poll found.
Canadian government bond prices were mixed across the maturity curve, with the two-year CA2YT=RR price down half a Canadian cent to yield 0.740 percent and the benchmark 10-year CA10YT=RR up 9 Canadian cents to yield 1.690 percent.
Reporting by Alastair Sharp; Editing by Meredith Mazzilli and James Dalgleish