March 5, 2019 / 3:29 PM / 7 months ago

CANADA FX DEBT-C$ hits 5-week low as China deals potential blow to Canadian economy

* Canadian dollar falls 0.2 percent against the greenback

* Loonie touches its weakest since Jan. 25 at 1.3352

* Price of U.S. oil rises 0.3 percent

* Canadian bond prices decline across the yield curve

TORONTO, March 5 (Reuters) - The Canadian dollar weakened to its lowest in more than five weeks against its U.S. counterpart on Tuesday, one day before an interest rate decision by the Bank of Canada, as China dealt a potential blow to the Canadian economy.

China has canceled major Canadian agribusiness Richardson International Ltd’s registration to ship canola to China. A lasting block on Richardson’s canola exports would be a headache for Canada’s biggest grain handler and could hurt the Canadian economy.

The move came after the Chinese government and its leading smartphone maker, Huawei Technologies Ltd, stepped up pressure on Monday on the U.S. and Canadian governments in a dispute over trade and telecommunications technology that has ensnared Huawei’s chief financial officer, who faces U.S. criminal charges.

The Bank of Canada, which has raised interest rates 125 basis points since July 2017, is widely expected to leave its benchmark rate on hold on Wednesday at 1.75 percent.

The central bank may be closer to a policy-turning point, as it is still set to hike its key interest rate once more later this year. But there is now a small chance of a cut, according to economists polled by Reuters.

At 10:00 a.m. EST (1500 GMT), the Canadian dollar traded 0.2 percent lower at 1.3337 to the greenback, or 74.98 U.S. cents. The currency touched its weakest since Jan. 25 at 1.3352.

The decline for the loonie came as concerns grew over a political scandal. In a serious blow to Canadian Prime Minister Justin Trudeau, a second member of his Cabinet resigned on Monday, saying she had lost confidence in how the government had dealt with an escalating political scandal.

U.S. crude oil futures were up 0.3 percent at $56.74 a barrel as the market balanced OPEC-led efforts to tighten supply with the restart of Libya’s biggest oilfield and the prospect of weaker demand.

Oil is one of Canada’s major exports.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 2.5 Canadian cents to yield 1.759 percent and the 10-year was down 8 Canadian cents to yield 1.905 percent. (Reporting by Fergal Smith; Editing by Jeffrey Benkoe)

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