* Canadian dollar weakens 0.2% against the greenback
* Price of U.S. oil declines nearly 5%
* Canadian bond prices fall across the yield curve
By Fergal Smith
TORONTO, Jan 8 (Reuters) - The Canadian dollar fell to an eight-day low against its U.S. counterpart on Wednesday, as oil prices tumbled on fading alarm over an Iran rocket strike and the greenback broadly climbed.
At 2:46 p.m. (1946 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3029 to the greenback, or 76.75 U.S. cents. The currency touched its weakest intraday level since Dec. 31 at 1.3043.
"The weakness in oil prices has been a key contributor. Also, the strength in the U.S. dollar," said Mathieu Savary, strategist at BCA Research.
The price of oil, one of Canada's main exports, fell in a wild swing, soaring close to a four-month high in early trade on an Iranian rocket attack on U.S. forces in Iraq before retreating as Iran and the United States quickly ratcheted back tensions.
U.S. crude oil futures settled nearly 5% lower at $59.61 a barrel, while strengthening of the U.S. dollar .DXY was led by gains against the safe-haven yen JPY= . recent weak domestic economic indicators have also weighed on the Canadian dollar, Savary said. Official data on Tuesday showed that Canada's exports and imports both declined in November.
Canada's employment report for December is due on Friday. In November, the economy shed about 71,000 jobs.
Bank of Canada Governor Stephen Poloz is due to speak on Thursday, which could give investors clues on the interest rate outlook. The central bank left its benchmark interest rate on hold at 1.75% in 2019, when the loonie was the top performing G10 currency, even as some other major central banks, such as the Federal Reserve and the European Central Bank, eased.
Canada is more dependent than some other countries, such as the United States, on trade. So the loonie could benefit from recent signs of global economic recovery and easing of trade tensions between the United States and China.
"Ultimately, we are in an environment that is cyclically likely to turn very favorable for the Canadian dollar," Savary said.
Canadian government bond prices were lower across a steeper yield curve on Wednesday in sympathy with U.S. Treasuries. The two-year CA2YT=RR fell 5.5 Canadian cents to yield 1.670% and the 10-year CA10YT=RR was down 42 Canadian cents to yield 1.630%.