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Canadian dollar falls to nearly 3-week low as oil prices slide

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday as oil prices fell and the Bank of Canada said global trade disruptions could make it harder for the central bank to consistently meet its 2% inflation target.

The loonie was trading 0.3% lower at 1.36 to the U.S. dollar, or 73.53 U.S. cents, after touching its weakest intraday level since Aug. 23 at 1.3615.

"Cross-asset conditions are in the driving seat for USD-CAD today, with both falls for oil and equities conspiring to weigh on the loonie," said Nick Rees, a senior FX market analyst at Monex Europe Ltd.

Global shares edged down and the price of oil, one of Canada's major exports, extended its recent declines.

U.S. crude oil futures were trading 3.6% lower at $66.23 a barrel as a weaker demand outlook and risks of global oversupply continued to weigh on the market.

With globalization slowing, the cost of global goods might not decline to the same degree, and this could put more upward pressure on inflation, Bank of Canada Governor Tiff Macklem said in a speech to the Canada-UK Chamber of Commerce in London.

Still, speaking with reporters, Macklem left the door open to larger interest rate cuts if growth falls short of expectations. The BoC last week cut its benchmark rate for the third time since June, lowering it by 25 basis points to 4.25%.

The U.S. dollar rose against a basket of major currencies ahead of U.S. inflation data on Wednesday that could guide expectations for the pace of expected rate cuts by the Federal Reserve.

Canadian government bond yields moved lower across a flatter curve. The 10-year was down 9.4 basis points at 2.916%, trading near its lowest level in 16 months.

(Reporting by Fergal Smith; Editing by Paul Simao)