(Adds dealer quote and details throughout, updates prices) * Canadian dollar weakens 0.6% against the greenback * Canadian exports fall 2.3% in September * Price of U.S. oil settles 2.5% lower * Canadian 10-year yield eases 7.8 basis points to 1.656% By Fergal Smith TORONTO, Nov 4 (Reuters) - The Canadian dollar on Thursday weakened against its U.S. counterpart by the most in nearly seven weeks as oil prices fell and the greenback rallied against a basket of major currencies. The loonie was trading 0.6% lower at 1.2468 to the greenback, or 80.21 U.S. cents, its biggest decline since Sept. 17. It touched its weakest intraday level in more than three weeks at 1.2471. "Choppy oil prices played a significant role in Canadian dollar direction," Rahim Madhavji, president at Knightsbridge Foreign Exchange, said in a note. Oil prices reversed earlier gains in a volatile session after a report that Saudi Arabia"s oil output will soon surpass 10 million barrels per day for the first time since the outset of the coronavirus pandemic. U.S. crude oil futures settled 2.5% lower at $78.81 a barrel, while the U.S. dollar rebounded from a dip after the U.S. Federal Reserve repeated it saw high inflation as transitory. The decline for the loonie came as data showed Canada"s exports fell in September, with a semiconductor chip shortage weighing on motor vehicle and parts production. The Canadian employment report for October, due on Friday, can offer further clues about the strength of the domestic economy. Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased 7.8 basis points to 1.656%, after touching on Monday its highest level since May 2019 at 1.766%. The gap between the Ontario and Canadian 10-year yields narrowed by 6 basis points to a spread of 52 basis points in favor of Ontario"s bond. The province, which is the world"s largest sub-sovereign borrower, projected a smaller budget deficit for the current fiscal year. (Reporting by Fergal Smith; editing by Jonathan Oatis)