* Canadian dollar falls 0.4% against the greenback
* Price of U.S. oil increases 0.9%
* Canada's 10-year yield hits a nearly two-month low at 1.563%
By Fergal Smith
TORONTO, May 28 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback broadly climbed, but the loonie stayed within its recent range ahead of a Bank of Canada interest rate decision on Wednesday.
The U.S. dollar .DXY rose against a basket of major currencies as trade tensions drove investors to buy safe-haven currencies and as political risks in Europe weighed on the euro. just seeing your typical broad (U.S.) dollar-buying type of flow whenever you see stocks come off," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. A lack of progress in the trade dispute between the United States and China has worried investors, he said.
Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of trade.
The price of oil increased on Tuesday after flooding throughout the Midwest constrained crude flow from the main U.S. storage hub in Cushing, Oklahoma. U.S. crude oil futures CLc1 settled 0.9% higher at $59.14 a barrel. 3:34 p.m. (1934 GMT), the Canadian dollar CAD=D4 was trading 0.4% lower at 1.3490 to the greenback, or 74.13 U.S. cents. The currency, which has spent much of the last month between 1.34 and 1.35, traded in a range of 1.3434 to 1.3497.
The Bank of Canada is widely expected to leave its benchmark interest rate unchanged on Wednesday at 1.75% as it weighs developments in household spending, oil markets and global trade policy. data, including a record high monthly jobs gain in April, could make the central bank more confident in its projection that the domestic economy will pick up in the second half of the year, Bregar said.
The central bank, which has kept the policy rate on hold since October after having tightened by 125 basis points since July 2017, has forecast faster growth over the coming months after what it expects was barely any growth in the first three months of the year. Canada's first-quarter gross domestic product data is due on Friday.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR climbed 25 Canadian cents to yield 1.574%. The yield touched its lowest intraday since March 29 at 1.563%.