(Adds dealer quotes and details throughout; updates prices) * Loonie touches its weakest since March 10 at 1.2628 * Price of U.S. oil settles 4.3% lower * CFIB Business Barometer Index rises to 10-year high * Canadian bond yields ease across the curve By Fergal Smith TORONTO, March 25 (Reuters) - The Canadian dollar fell to a two-week low against its broadly stronger U.S. counterpart on Thursday, as oil prices fell and Canada"s long-term bond yields dropped further below those in the United States. The Canadian dollar was trading 0.3% lower at 1.2614 to the greenback, or 79.28 U.S. cents, having touched its weakest since March 10 at 1.2628. "It"s probably corresponding with the rates story," said Andrew Cherry, head of global markets at HSBC Bank Canada. Canada"s 10-year yield was down 2.4 basis points at 1.451%, extending its pullback from a 14-month high last Thursday at 1.677%. The spread between it and the 10-year U.S. yield widened by 2.3 basis points to about 16 basis points, its largest gap since Feb. 17, as U.S. rates moved to session highs after a Treasury note auction. "That differential may be a little bit to explain the weakness in the Canadian dollar," Cherry said. The U.S. dollar reached a fresh four-month high as investors" appetite for risk shrunk, while the price of oil, one of Canada"s major exports, extended a string of market weakness on renewed lockdowns in Europe and Asia. U.S. crude oil futures settled 4.3% lower at $58.56 a barrel. Canadian small business sentiment soared in March, data showed. The CFIB Business Barometer Index rose to 68.2 from 62.5 in February, its highest level in nearly 10 years. Canada"s federal government is watching the country"s red-hot housing market "very closely" and is aware that rising prices make it more difficult for many young Canadians to buy a home, Finance Minister Chrystia Freeland said. On Tuesday, Bank of Canada Deputy Governor Toni Gravelle told Reuters that the central bank is seeing evidence of investor activity in some Canadian housing markets. The bank is likely to reduce its bond purchases next month, say strategists. (Reporting by Fergal Smith; editing by Jonathan Oatis, Kirsten Donovan)