Market News

 (Adds strategist comments, market details, updates prices)
    * Canadian dollar weakens 0.5% against the greenback
    * Touches its weakest level since Aug. 23 at 1.2762
    * Price of U.S. oil settles 0.9% lower; copper falls 0.7%
    * Canadian 10-year yield touches a 2-month high at 1.300%

    By Fergal Smith
    TORONTO, Sept 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as commodity prices fell
and investors adjusted their positions ahead of a Canadian
federal election, with the currency losing ground for a second
week.
    The Canadian dollar        was trading 0.5% lower at 1.2746
to the greenback, or 78.46 U.S. cents, after touching its
weakest level since Aug. 23 at 1.2762. For the week, the
currency was down 0.4%, adding to its decline from the prior
week.
    "It may just be a little bit of position-readying for the
election outcome on Monday," said Amo Sahota, director at
Klarity FX in San Francisco. "It is a slightly tighter race than
I think Trudeau would definitely have wanted."    
    Foreign investors are growing more worried that Canada's
election on Monday could result in a deadlock that hampers
Ottawa's response to the COVID-19 pandemic and further slows the
economic recovery from the crisis.             
    Polls show Prime Minister Justin Trudeau's center-left
Liberals virtually tied with the opposition Conservatives.
            
    Declines for equity and commodity markets added to pressure
on the loonie, Sahota said.
    "It's a little bit of a reality check coming into the
marketplace, readying for the FOMC, readying for the election on
Monday, reacting to the metal prices." 
    World shares          fell, pressured by concerns over
China's markets, the potential for a U.S. corporate tax hike and
an update on the U.S. Federal Reserve's tapering strategy next
week.
    Oil       , one of Canada's major exports, settled 0.9%
lower at $71.97 a barrel, while copper        was down 0.7%.
                         
    Canadian government bond yields were higher across a steeper
curve, tracking the move in U.S. Treasuries.
    The 10-year             touched its highest level since July
15 at 1.300% before dipping slightly to 1.293%, up 5.7 basis
points on the day.

 (Reporting by Fergal Smith in Toronto
Editing by Jane Merriman and Matthew Lewis)