TORONTO, Sept 10 (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Wednesday as expectations the Bank of Canada would resume its easing cycle offset higher oil prices.
The loonie was trading 0.1% lower at 1.3860 per U.S. dollar, or 72.15 U.S. cents, after touching its weakest intraday level since August 26 at 1.3867.
"The market is readying itself for a Bank of Canada rate cut," said Amo Sahota, a director at Klarity FX in San Francisco. "That's weighing on the loonie just a little bit but not by a sufficient amount to get us really motoring along."
Investors see a roughly 90% chance that the BoC will lower interest rates next Wednesday after recent employment data showed that tariff-related uncertainty is taking a toll on the domestic economy. The central bank has been on hold since cutting its benchmark rate to 2.75% in March.
The Fed is also due to make a policy decision next Wednesday. Expectations of a rate cut were supported by data showing that U.S. producer prices unexpectedly fell in August.
"If the U.S. is in a position where it's having to cut interest rates it's very rare for Canada to just be sitting on the sidelines," Sahota said.
Canada sends about 75% of its exports to the U.S., including oil , which settled 1.7% higher at $63.67 a barrel on rising geopolitical tensions.
Canadian bond yields moved lower across a flatter curve. The 10-year was down 6.3 basis points at 3.174%, after earlier touching its lowest level since May 16 at 3.157%.
Reporting by Fergal Smith, Editing by Nick Zieminski
