* Canadian dollar falls 0.2% against the greenback
* Canadian housing starts surge in June
* Price of U.S. oil increases 0.3%
* Canada's 10-year yield touches a five-week high at 1.594%
By Fergal Smith
TORONTO, July 9 (Reuters) - The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Tuesday as the greenback broadly climbed and investors saw potential for the Bank of Canada to try to slow the currency's recent rally.
The loonie has been the top-performing G10 currency this year as Canada's economy showed signs of picking up in recent months and traders bet that Bank of Canada Governor Stephen Poloz would cut interest rates at a slower pace than the Federal Reserve.
"There could still be some trade-related threats for Canada and on that basis he (Poloz) may just want to cool down the market," said Amo Sahota, a director at Klarity FX in San Francisco.
A stronger loonie could make Canada's exports less competitive, hurting the country's economy.
The U.S. dollar .DXY gained against a basket of major currencies as investors reassessed their expectations of how much the Fed may cut interest rates this month. Fed Chief Jerome Powell is due to testify before Congress on Wednesday. price of oil, one of Canada's major exports, was supported by Middle East tensions and OPEC supply cuts. U.S. crude oil futures CLc1 settled 0.3% higher at $57.83 a barrel. 4:14 p.m. (2014 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3129 to the greenback, or 76.17 U.S. cents. The currency touched its weakest intraday level since July 1 at 1.3141.
Speculators have turned bullish on the Canadian dollar for the first time since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Monday. As of July 2, there were 6,293 contracts net long the loonie, a swing from 14,790 contracts net short the currency in the prior week. housing starts rose much more than expected in June, to a seasonally adjusted annualized rate of 245,657 units, the Canadian Mortgage and Housing Corp (CMHC) said. data from Statistics Canada showed that the value of building permits fell by 13% in May from April, largely due to the value of permits in British Columbia returning to recent levels following a surge in April. government bond prices were higher across a steeper yield curve, with the two-year CA2YT=RR up 6 Canadian cents to yield 1.640% and the 10-year CA10YT=RR rising 1 Canadian cent to yield 1.579%.
The 10-year yield touched its highest intraday since May 30 at 1.594%.