* Canadian dollar falls 0.1% against the greenback
* Price of U.S. oil increases 1.6%
* Canadian bond prices trade mixed across the yield curve
By Fergal Smith
TORONTO, Aug 28 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Wednesday, extending its pullback from a near two-week high the previous day, as investors mulled the prospect of a surprise interest rate cut next week from the Bank of Canada.
At 3:59 p.m. (1959 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3304 to the greenback, or 75.17 U.S. cents. The currency, which notched on Tuesday its strongest intraday level since Aug. 14 at 1.3225, traded in a range of 1.3282 to 1.3319.
"There was a lot of chatter overnight about a surprise rate cut next week by the Bank of Canada," said Tony Valente, a senior FX dealer at AscendantFX. "I don't know if it is justified."
The Bank of Canada has stayed on the sidelines in recent months even as other central banks, such as the Federal Reserve, have eased interest rates.
Gross domestic product data, due on Friday, is expected to confirm that Canada's economy rebounded after a slowdown around the turn of the year. Analysts project second-quarter growth of 3%.
The price of oil, one of Canada's major exports, rose after a larger-than-expected decline in U.S. crude stockpiles helped ease worries about weakening oil demand caused by the trade war between the United States and China. U.S. crude oil futures settled 1.6% higher at $55.78 a barrel. government bond prices were mixed across the yield curve, with the two-year CA2YT=RR up 1 Canadian cent to yield 1.333% and the 10-year CA10YT=RR falling 6 Canadian cents to yield 1.131%.
Earlier this month, the 10-year yield hit its lowest since October 2016 at 1.083%.