* Canadian dollar at C$1.3066, or 76.53 U.S. cents
* Loonie touches its weakest since July 25 at C$1.3121
* Price of U.S. oil falls 2 percent
* Bond prices mixed across a flatter yield curve
By Fergal Smith
TORONTO, Aug 8 (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Wednesday as oil prices fell and after a report that Saudi Arabia has instructed overseas asset managers to dispose of Canadian assets.
Saudi Arabia is selling Canadian assets in an escalating row after Ottawa criticized the arrest of a female activist, the Financial Times reported, citing sources. share of Saudi Arabia's foreign exchange reserves would likely not be enough by itself to hurt the loonie, said Mark McCormick (NYSE:MKC), North American head of FX strategy at TD Securities.
"The headlines hit the general populous which I think helped provide a little bit of the spark but to me this is a little bit more technical," McCormick said. "This is part of this story that shows that CAD has had this massive divergence from typical drivers over the past few days, which has potentially been reinforced by some momentum traders."
The price of oil, one of Canada's major exports, fell after Chinese import data showed a slowdown in demand and as a trade dispute between Washington and Beijing escalated further. crude CLc1 prices were down 2 percent at $67.78 a barrel.
At 10:04 a.m. EDT (1404 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at C$1.3066 to the greenback, or 76.53 U.S. cents. The currency's strongest level of the session was C$1.3050, while it touched its weakest since July 25 at C$1.3121.
The loonie benefited over recent days from data showing stronger-than-expected growth in Canada's economy in May and a record high for the country's exports in June.
The value of Canadian building permits unexpectedly dropped by 2.3 percent in June from May on weakness in the residential sector, Statistics Canada reported. jobs data for July is due on Friday.
Canadian government bond prices were mixed across a flatter yield curve. The two-year CA2YT=RR fell 0.5 Canadian cents to yield 2.132 percent and the 10-year CA10YT=RR gained 4 Canadian cents to yield 2.365 percent.