TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as crude oil prices fell and after firmer than expected U.S. data supported bets for Federal Reserve interest rate hikes this year.

The currency reached a 12-week high on Tuesday at C$1.3387, after stronger-than-expected growth in fourth quarter gross domestic product reduced pressure on the Bank of Canada to cut rates.

The implied probability of a July rate cut has fallen to just 25 percent from 33 percent from before the GDP data. It was at 70 percent as recently as Feb. 19, as reflected in the overnight index swaps market BOCWATCH.

Moreover, the March 22 federal budget presentation is expected to include stimulus measures to support the economy.

Oil prices retreated as an industry report showing a rise in U.S. crude stockpiles to a new record countered support from producer efforts to tackle a supply glut.

U.S. crude CLc1 prices were down 1.63 percent to $33.84 a barrel.

At 9:27 a.m. EST, the Canadian dollar CAD=D4 was trading at C$1.3488 to the greenback, or 74.14 U.S. cents, weaker than Tuesday's official close of C$1.3414, or 74.55 U.S. cents.

The currency's strongest level of the session was C$1.3406, while its weakest level was C$1.3493.

Data released south of the border on Wednesday showed U.S. private employers added more jobs than expected in February. It follows encouraging U.S. factory and construction data on Tuesday that suggested the world's biggest economy was regaining momentum.

Canadian government bond prices were mixed across the maturity curve, with the two-year CA2YT=RR price flat to yield 0.531 percent and the benchmark 10-year CA10YT=RR falling 25 Canadian cents to yield 1.263 percent.

The curve steepened further as longer-dated maturities underperformed. The spread between the 2-year and 10-year yields widened by 2.8 basis points to 73.2 basis points, its widest since Feb. 5.

The Bank of Canada will conduct a C$400 million 30-year real return bond auction on behalf of the Government of Canada. The bidding deadline is 12:00 p.m. EST (1700 GMT).

Canadian trade data for January is awaited on Friday. ECONCA

(Reporting by Fergal Smith Editing by W Simon)



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