* Canadian dollar weakens 0.2% against the greenback * Price of U.S. oil decreases 0.7% * Producer prices in Canada fall 0.3% in August * Canadian 10-year yield eases 2.3 basis points TORONTO, Sept 29 (Reuters) - The Canadian dollar on Wednesday weakened for a second day against its U.S. counterpart as oil prices fell and the greenback posted broad based gains. The U.S. dollar climbed to a 2021 peak against rival currencies even though a dispute in Washington over the U.S. debt ceiling threatened to plunge the government into a shutdown. Canada sends about 75% of its exports to the United States, including oil, which was pressured by an unexpected rise in U.S. crude inventories and concerns about a slowing Chinese economy. U.S. crude prices were down 0.7% at $74.79 a barrel, while the Canadian dollar fell 0.2% to 1.2710 per greenback, or 78.68 U.S. cents. On Tuesday, the loonie touched its strongest level in nearly three weeks at 1.2589 before retreating. Canadian Prime Minister Justin Trudeau said on Tuesday he will swear in his new Cabinet next month, with Chrystia Freeland returning as his finance minister and deputy, after his Liberals were re-elected for the third time. Producer prices in Canada fell by 0.3% in August from July on lower prices for softwood lumber, Statistics Canada said on Wednesday. Still, they were up 14.3% from August last year. U.S. and Canadian government borrowing costs steadied after racing on Tuesday to their highest levels in months. The Canadian 10-year yield eased 2.3 basis points to 1.477%. Canada"s bond market will be closed on Thursday for the National Day for Truth and Reconciliation. GDP data for July is due on Friday, which could provide clues on the Bank of Canada policy outlook. (Reporting by Fergal Smith; editing by Jonathan Oatis) Our Standards: The Thomson Reuters Trust Principles.