* Canadian dollar drops for fourth straight session
* Talk of pending interest rate cut weigh on currency
* Bond prices down ahead of key jobs data due Friday
By Frank Pingue
TORONTO, June 4 (Reuters) - The Canadian dollar fell against the U.S. dollar for a fourth straight session on Wednesday due to another retreat in oil prices and a report suggesting the Bank of Canada should continue cutting interest rates.
Canadian bond prices followed the U.S. Treasury market lower across the curve after two pieces of U.S. economic data topped estimates, but the slide was contained ahead of Friday's key Canadian and U.S. jobs reports.
The Canadian dollar closed at C$1.0183 to the U.S. dollar, or 98.20 U.S. cents, down from C$1.0086 to the U.S. dollar, or 99.15 U.S. cents, at Tuesday's close.
The currency fell to its lowest level in a month late in the session and is down nearly 3 percent since last Thursday's session close.
Oil prices fell further from the record high reached last month in what is starting to look like a trend, and that was being blamed for the latest retreat in the commodity-linked Canadian currency. Canada is a major oil producer and exporter.
"I'd still be cautious about calling for an end to the strength in oil prices but at least for the time being it looks like some of the heat is coming out of the oil market," said Doug Porter, deputy chief economist at BMO Capital Markets. "And I think that's been the biggest influence today."
Comments from U.S. Federal Reserve Chairman Ben Bernanke late in the afternoon gave a bid to the U.S. dollar and were enough to send the Canadian dollar to its lowest level since May 5.
Bernanke, in a speech at Harvard University, said rising long-term inflation expectations were a significant concern for policymakers.
Another drag on the Canadian currency was a Organization for Economic Co-operation and Development report that suggested the Bank of Canada should continue to cut interest rates.
"The market's already leaning extremely heavily in that way anyway, but to have the OECD giving it the stamp of approval I think just raises the chance that the bank may possibly cut more than just next week," Porter said.
The Bank of Canada is widely expected to cut its key rate by 25 basis points to 2.75 percent when it makes a scheduled rate announcement next Tuesday. For the its subsequent rate announcement, on July 15, most Canadian primary dealers expect no change in rates.
BOND PRICES DROP
Canadian bond prices, with no domestic economic reports to influence a move, all ended lower as data from the United States came in ahead of market expectations.
The Institute for Supply Management's services index came in at 51.7 for May, above the 50 level that separates growth from contraction, and above estimates for 51.0. Also, ADP Employer Services said its gauge of private-sector employment rose unexpectedly for May.
"Overall the economic data out of the U.S. were a little bit better," Porter said. "And in the lead-up to Friday's employment reports it looks like the markets are turning a little bit more cautious."
Containing the move in bond prices was hesitation among dealers ahead of May employment reports for Canada and the United States due on Friday.
The Canadian economy is expected to have added 10,000 jobs in May while the unemployment rate remained steady 6.1 percent, according to Reuters Estimates.
The two-year bond fell 5 Canadian cents to C$101.72 to yield 2.855 percent. The 10-year bond dropped 13 Canadian cents to C$102.75 to yield 3.638 percent.
The yield spread between the two-year and 10-year bond was 78.3 basis points, up from 73.8 at the previous close.
The 30-year bond fell 32 Canadian cents to C$115.01 for a yield of 4.109 percent. In the United States, the 30-year Treasury yielded 4.695 percent.
The three-month when-issued T-bill yielded 2.54 percent, down from 2.58 percent at the previous close. (Editing by Peter Galloway)