The Canadian dollar weakened on Wednesday to a 2017-low against its U.S. counterpart, as oil prices fell and the greenback gained ground against a basket of major currencies.

The loonie settled at $1.3494 to the greenback, or 74.11 cents US, much weaker than Tuesday's close of $1.3416, or 74.55 cents US. It has jumped four cents since late February.

The previous low for the year was hit on Jan. 3 when the loonie touched 74.33 cents US.

Gains for the U.S. dollar came as data showed U.S. private employers added 298,000 jobs in February, well above economists' expectations.

Stronger-than-expected U.S. payroll numbers, due for release on Friday, could help cement expectations that the Federal Reserve will raise interest rates next week. 

As of Wednesday, the implied probability of the Fed raising rates at its March 15 meeting is 100 per cent. One month ago, the probability was just 24 per cent.

“This has been a head-spinning move in market sentiment. I don’t recall anything quite as vicious as the swing we’ve seen in this move in expectations in the very short term,” said Shaun Osborne, Scotiabank’s Chief FX Strategist, in an interview with BNN.

U.S. crude prices hit 2017 lows on Wednesday, plummeting five per cent as U.S. inventories hit record highs.

U.S. West Texas Intermediate crude ended the session at US$50.28 per barrel, down US$2.86, or 5.38 per cent after falling to its lowest level since Dec. 15.

Brent crude slumped to its lowest level since Dec. 8 at US$52.93, before settling at US$53.11, down US$2.81 or 5.03 per cent.

“When oil could not break $US55 and flows started to turn negative and all these oil inventories and the commodity markets selling off, that put further pressure on the Canadian dollar,” Diana Avigdor, Head of trading, Barometer Capital Management told BNN Wednesday.

“With commodities not working, it’s not surprising that the Canadian dollar flows are not materializing.”

The currency's strongest level of the session was $1.3398, while it touched its weakest since Dec. 30 at $1.3500.

Canada's employment report for February is due on Friday.

In domestic data, Canadian housing starts inched higher in February from the previous month, and building permits rose in January as the long housing boom continued to defy expectations of a slowdown, separate reports showed.

Canadian government bond prices fell across a steeper yield curve. The two-year slipped 3.5 cents to yield 0.819 per cent, and the 10-year declined 32 cents to yield 1.776 per cent.

Canada will release its next federal budget on March 22, setting the stage for a fresh estimate of how big the deficit will get as the Liberal government spends on infrastructure to boost the economy.

With files from BNN