CANADA FX DEBT-C$ hits 2-week low after report Saudi Arabia selling Canadian assets

    * Canadian dollar at C$1.3066, or 76.53 U.S. cents
    * Loonie touches its weakest since July 25 at C$1.3121
    * Price of U.S. oil falls 2 percent     
    * Bond prices mixed across a flatter yield curve

    By Fergal Smith
    TORONTO, Aug 8 (Reuters) - The Canadian dollar weakened to a
two-week low against its U.S. counterpart on Wednesday as oil
prices fell and after a report that Saudi Arabia has instructed
overseas asset managers to dispose of Canadian assets.
    Saudi Arabia is selling Canadian assets in an escalating row
after Ottawa criticized the arrest of a female activist, the
Financial Times reported, citing sources.             
    Canada's share of Saudi Arabia's foreign exchange reserves
would likely not be enough by itself to hurt the loonie, said
Mark McCormick, North American head of FX strategy at TD
    "The headlines hit the general populous which I think helped
provide a little bit of the spark but to me this is a little bit
more technical," McCormick said. "This is part of this story
that shows that CAD has had this massive divergence from typical
drivers over the past few days, which has potentially been
reinforced by some momentum traders."
    The price of oil, one of Canada's major exports, fell after
Chinese import data showed a slowdown in demand and as a trade
dispute between Washington and Beijing escalated further.
    U.S. crude        prices were down 2 percent at $67.78 a
    At 10:04 a.m. EDT (1404 GMT), the Canadian dollar         
was trading 0.1 percent lower at C$1.3066 to the greenback, or
76.53 U.S. cents. The currency's strongest level of the session
was C$1.3050, while it touched its weakest since July 25 at
    The loonie benefited over recent days from data showing
stronger-than-expected growth in Canada's economy in May and a
record high for the country's exports in June.
    The value of Canadian building permits unexpectedly dropped
by 2.3 percent in June from May on weakness in the residential
sector, Statistics Canada reported.             
    Canada's jobs data for July is due on Friday.
    Canadian government bond prices were mixed across a flatter
yield curve. The two-year            fell 0.5 Canadian cents to
yield 2.132 percent and the 10-year             gained 4
Canadian cents to yield 2.365 percent.

 (Reporting by Fergal Smith; Editing by Stegve Orlofsky)