Canadian dollar drops to near one-year low amid global trade tensions

TORONTO (Reuters) - The Canadian dollar weakened to a nearly one-year low against its U.S. counterpart on Tuesday as an escalating trade dispute between the United States and China pressured global stock and commodity markets.

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

Equity and oil prices fell after U.S. President Donald Trump on Monday threatened to impose a 10 percent tariff on $200 billion of Chinese goods, which Beijing warned it would fight back against with “qualitative” and “quantitative” measures.

Investors have been concerned the trade spat between the two economic giants could slow global growth.

U.S. crude CLc1 prices were down 1.6 percent at $64.82 a barrel. Oil is one of Canada's major exports.

Canada runs a current account deficit, so its currency tends to weaken when risk appetite sours. The country has its own trade feud with the United States and is in slow-moving talks with the U.S. and Mexico to revamp the North American Free Trade Agreement.

At 9:04 a.m. EDT (1304 GMT), the Canadian dollar CAD=D4 was trading 0.5 percent lower at C$1.3270 to the greenback, or 75.36 U.S. cents. The currency touched its weakest level since June 23, 2017 at C$1.3291.

Canadian government bond prices were higher across a flatter yield curve in sympathy with Treasuries as the trade spat lifted demand for safe-haven assets.

The two-year CA2YT=RR rose 5 Canadian cents to yield 1.846 percent and the 10-year CA10YT=RR climbed 42 Canadian cents to yield 2.155 percent.

The 10-year yield touched its lowest intraday since April 11 at 2.146 percent.

Canadian inflation data for May and the April retail sales report are due out on Friday.

Reporting by Fergal Smith; Editing by Bernadette Baum