Canadian dollar hits 8-day low as Wall Street slides

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Tuesday as a downturn in investor sentiment offset preliminary domestic data for August showing gains for wholesale trade and factory sales.

The loonie was trading 0.5% lower at 1.3518 to the greenback, or 73.98 U.S. cents, after touching its weakest level since Sept. 18 at 1.3528.

"The Canadian dollar was not going to be able to swim against the tide of a stronger U.S. dollar for very long," said Michael Goshko, senior market analyst at Convera Canada ULC.

"You are talking about a dollar that's been supper strong now for almost two months, plus you have risk (appetite) rolling over."

Wall Street's main indexes fell and the U.S. dollar added to recent gains against a basket of major currencies as investors continued to grapple with the prospect of a prolonged period of restrictive monetary policy by the Federal Reserve.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in investor sentiment.

The price of oil settled 0.8% higher at $90.39 a barrel, helped by expectations of tighter supply.

Canadian wholesale trade rose 2.6% in August from July and factory sales were up 1%, advance estimates from Statistics Canada showed. GDP data for July, due on Friday, could offer additional clues on the strength of the domestic economy.

The Canadian 10-year yield rose 2 basis points to 4.046%, its highest level since December 2007, tracking moves in U.S. Treasuries.

Canada is increasing the annual limit for the issuance of Canada Mortgage Bonds (CMBs) to C$60 billion from C$40 billion, designating the increased amount for funding mortgage loans on multi-unit rental projects insured by the Canada Mortgage and Housing Corporation, Finance Minister Chrystia Freeland said.

(Reporting by Fergal Smith; Editing by Alison Williams)