* C$ finishes at 85.65 U.S. cents
* 4 percent drop in oil prices helps pull C$ to 7-week low
* Bond prices higher across curve as TSX drops (Adds details)
By Jennifer Kwan
TORONTO, July 8 (Reuters) - The Canadian dollar weakened and touched a seven-week low against the U.S. currency on Wednesday, pressured by sliding oil and equity prices as investors questioned the pace of economic growth.
The currency peaked at C$1.1587 to the U.S. dollar and then fell to C$1.1720, its lowest level since May 18, as a selloff in the resource-heavy Toronto Stock Exchange composite index .GSPTSE intensified amid tumbling commodity prices. The stock index fell for a third straight session. [ID:nN08409697]
As well, the yen had its biggest jump in months against a range of currencies on Wednesday on safe-haven buying spurred by renewed concerns about the global economy.[FRX/]
Steve Butler, director of foreign exchange trading at Scotia Capital, noted that the yen and the U.S. dollar typically benefit from investor aversion to risk.
"It has a lot to do with risk. The market is certainly uneasy about the global economy," he said.
The Canadian dollar finished at C$1.1676 to the U.S. dollar, or 85.65 U.S. cents, down slightly from C$1.1661 to the U.S. dollar, or 85.76 U.S. cents, at Tuesday's close.
Oil dropped more than 4 percent to under $61 a barrel after a U.S. government report showed larger than expected distillate and gasoline inventories [ID:nN08405735] Oil settled 4.4 percent lower at $60.14 a barrel.
"Investors are questioning whether the greenshoots are withering on the vine," said Sal Guatieri, senior economist at BMO Capital Markets.
Given commodity price weakness and broader economic concerns, market watchers said they would not be surprised to see the Canadian dollar move through the C$1.1800 level in the near future.
BOND PRICES HIGHER
Canadian bond prices were higher across the curve as money flowed into safe government debt due to investor anxiety about the economic outlook, Guatieri said.
Prices were also influenced by the bigger U.S. Treasury market, where prices rose on Wednesday following a successful auction. [ID:nN08396034]
The two-year Canada bond ticked up 1 Canadian cent to C$100.16 to yield 1.164 percent, while the 10-year bond rose 55 Canadian cents to C$104.05 to yield 3.267 percent.
The 30-year bond climbed 40 Canadian cents to C$119.90 to yield 3.832 percent. In the United States, the 30-year Treasury yielded 4.1706 percent.
Canadian bonds mostly underperformed U.S. Treasuries across the curve. The Canadian 30-year bond was 33.9 basis points below the U.S. 30-year yield, compared with about 45 basis points below on Tuesday. (Reporting by Jennifer Kwan; editing by Peter Galloway)