Canadian dollar hits one-week low against stronger greenback as oil dips

TORONTO (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Tuesday as oil prices dipped and the greenback broadly climbed.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

The U.S. dollar .DXY rose against a basket of major currencies, boosted by a 17-year high for U.S. consumer confidence in November and the prospect of tax cuts.

“We have had progress on the U.S. tax reform agenda,” said Eric Theoret, currency strategist at Scotiabank. “It’s a broad rally in the U.S. dollar on this optimism.”

Prices of oil, one of Canada’s major exports, were weighed by uncertainty over the outcome of an OPEC meeting this week at which an extension to its price-supporting output cuts will be discussed.

U.S. crude oil futures CLc1 settled 0.2 percent lower at $57.99 a barrel.

At 4 p.m. ET (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2815 to the greenback, or 78.03 U.S. cents, down 0.4 percent.

The currency’s strongest level of the session was C$1.2756, while it touched its weakest since Nov. 21 at C$1.2825.

Vulnerabilities created by Canada’s high household debt and hot housing market remain elevated but should ease over time as a stronger economy and tighter mortgage requirements help improve conditions, the Bank of Canada said.

Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 4 Canadian cents to yield 1.419 percent and the 10-year CA10YT=RR rising 41 Canadian cents to yield 1.84 percent.

The 10-year yield touched its lowest since Aug. 29 at 1.805 percent, while the gap between the 10-year yield and its U.S. equivalent widened by 4.9 basis points to a spread of -48.8 basis points.

Data will be released Friday on Canada’s jobs for November and gross domestic product for the quarter.

Reporting by Fergal Smith; Editing by Bernadette Baum