* Canadian dollar at C$1.2676, or 78.89 U.S. cents
* Loonie touches its weakest since July 14 at C$1.2735
* Bond prices move higher across a flatter yield curve
TORONTO, Aug 10 (Reuters) - The Canadian dollar edged higher on Thursday against its U.S. counterpart, recovering from an earlier near four-week low as higher oil prices offset U.S.-North Korea tensions.
U.S. crude prices were up 1.05 percent at $50.08 a
barrel, lifted by a sustained decline in inventories and as Saudi Arabia prepared to cut crude supplies to its prized Asian customers. Oil is one of Canada's major exports. On global markets, simmering tensions between the United States and North Korea weighed on stocks and supported safe-haven currencies, such as the Japanese yen. As a major commodity producer, Canada could be hurt if geopolitics hampers global trade.
At 9:16 a.m. ET (1316 GMT), the Canadian dollar was
trading at C$1.2676 to the greenback, or 78.89 U.S. cents, up 0.2 percent. The currency's strongest level of the session was C$1.2673, while it touched its weakest since July 14 at C$1.2735. New housing prices in Canada rose less than expected in June as the Toronto market was unchanged for the first time in six months following provincial government measures to rein in gains, data from Statistics Canada showed. Investors worry that a cooling in the housing market could weigh on Canada's economy and slow the pace of additional interest rate hikes. The Bank of Canada hiked rates in July for the first time in nearly seven years. Economists expect another increase as soon as October. Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries, after data showing the biggest drop in U.S. producer prices in 11 months further reduced expectations of an interest rate hike by the Federal Reserve in December.
The 10-year bond rose 16 Canadian cents to yield
1.888 percent, while the gap between the 2-year and 10-year yields narrowed by 1.3 basis points to a spread of 65.5 bps, its narrowest since July 24.
(Reporting by Fergal Smith; Editing by W Simon)