By Fergal Smith
TORONTO (Reuters) - The Canadian dollar hit a nearly one-week low against its U.S. counterpart on Tuesday as the greenback broadly rose and investors weighed prospects of a deadline being met for a new trade pact between Canada, the United States and Mexico.
Mexico's economy minister said he saw diminishing chances for a new North American Free Trade Agreement ahead of a May 17 deadline to present a deal that could be signed by the current U.S. Congress.
Canada sends about 75 percent of its exports to the United States, so its economy could benefit if a NAFTA deal is reached.
"With NAFTA-on, NAFTA-off it places a bit more focus on the upcoming data that we have later this week and prospective tightening that is being priced into the curve," said Mazen Issa, senior FX strategist at TD Securities.
Chances of a Bank of Canada interest rate hike at the bank's next policy announcement on May 30 have climbed to about 50 percent from less than 25 percent at the beginning of the month.
The Bank of Canada appears to be losing sway in its own backyard as Canadian bond yields chase after rising U.S. interest rates even though Canadian policy makers have pledged to proceed slowly with rate hikes of their own.
The U.S. dollar (.DXY) rose against a basket of major currencies to the highest level since December, as data showing a pickup in U.S. consumer spending exerted fresh selling pressure on U.S. government bonds and sent the yield on the 10-year Treasury note to its highest level since July 2011.
At 5 p.m. EDT (2000 GMT), the Canadian dollar
The loonie retreated even as the price of oil, one of Canada's major exports, rose to multi-year highs. U.S. crude oil futures
Resales of Canadian homes fell 2.9 percent in April from March to the lowest level in more than five years, the Canadian Real Estate Association said.
Canadian government bond prices were lower across a steeper yield curve, with the two-year
The 10-year yield touched its highest intraday level since April 2014 at 2.521 percent.
Canadian inflation data for April is due on Friday.
(Reporting by Fergal Smith; Editing by Leslie Adler)