Canadian dollar weakens to nearly one-week low as oil pulls back

TORONTO (Reuters) - The Canadian dollar weakened to a nearly 1-week low against its U.S. counterpart on Thursday as U.S. crude oil pulled back from a 15-month high and investors weighed the Bank of Canada's more dovish tone. Losses for the loonie came one day after Bank of Canada policymakers said they had considered adding more monetary stimulus and that export weakness could be harder to turn around than they had thought. U.S. crude prices dropped 1.92 percent to $50.61 a barrel on profit-taking after markets rallied the previous day on another unseasonal draw in U.S. crude oil stocks. [O/R] At 9:21 a.m. EDT (1321 GMT), the Canadian dollar was trading at C$1.3181 to the greenback, or 75.87 U.S. cents, weaker than Wednesday's close of C$1.3127, or 76.18 U.S. cents. The currency's strongest level of the session was C$1.3115, while it touched its weakest since Oct. 14 at C$1.3214. Canada's inflation report for September is due on Friday. Annual inflation is expected to pick up to 1.5 percent after slipping towards the lower end of the Bank of Canada's targeted range a month earlier. Also on Friday, retail sales are expected to have increased 0.3 percent in August, rebounding from a decline a month before. Canadian government bond prices were higher across the yield curve, with the two-year price up 1.5 Canadian cents to yield 0.555 percent and the benchmark 10-year rising 7 Canadian cents to yield 1.185 percent. The 2-year yield fell 1.9 basis points further below its U.S. equivalent, to leave the spread at -26 basis points. It was -21.1 basis points before the Bank of Canada interest rate decision on Wednesday. (Reporting by Fergal Smith; Editing by Bernadette Baum)