Canadian dollar hits two-week low amid falling oil prices

The Canadian dollar weakened to a two-week low against its U.S. counterpart on Monday as oil fell, and the greenback drew support from heightened expectations of a U.S. interest rate hike as soon as September.

The odds of a Federal Reserve rate increase in September have climbed to 30 percent, up from 18 percent before senior Fed officials spoke on Friday, according to CME Group’s FedWatch tool.

Speaking in Jackson Hole, Wyoming, on Friday, Fed Chair Janet Yellen said the case for raising U.S. interest rates has strengthened in recent months. Fed Vice Chair Stanley Fischer later reinforced that message.

READ MORE: Should Canadians be cheering for lower or higher oil prices?

Oil prices fell, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities. U.S. crude oil futures were down 74 cents at $47.64 a barrel.

Oil is one of Canada’s major exports.

At 9:12 a.m. EDT (1312 GMT), the Canadian dollar was trading at C$1.3023 to the greenback, or 76.79 U.S. cents, weaker than Friday’s close of C$1.3000, or 76.92 U.S. cents.

The currency’s strongest level of the session was C$1.2971, while it touched its weakest since Aug. 11 at C$1.3029.

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Speculators raised bullish bets on the Canadian dollar for the first week in four, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions rose to 16,734 contracts in the week ended Aug. 23 from 12,473 contracts in the prior week.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year  bond rose 2 Canadian cents to yield 0.597 percent and the benchmark 10-year <climbed 22 Canadian cents to yield 1.069 percent.

READ MORE: Hard-hit Alberta and Atlantic Canada pessimistic about economy: Ipsos poll

Canada’s gross domestic product data for the second quarter is due for release on Wednesday. The economy is forecast to have contracted at a 1.5 percent annualized pace as growth was shaken by wildfires in northern Alberta that disrupted oil production.

GDP figures for June, which will also be released on Wednesday, are expected to show growth picked up by 0.4 percent in the month, which should bolster expectations the economy will rebound in the third quarter.