By Fergal Smith

TORONTO (Reuters) - The commodity-linked Canadian dollar weakened to a five-week low against its U.S. counterpart on Wednesday as an investor rethink of Federal Reserve interest rate cut prospects contributed to a sell off in riskier assets.

The loonie was trading 0.2% lower at 1.3525 to the greenback, or 73.94 U.S. cents, after touching its weakest intraday level since Dec. 13 at 1.3541.

Canadian yields for shorter-dated bonds have matched the move higher in U.S. Treasury yields which "suggests to us that it is deteriorating risk conditions in the driving seat for the loonie today," Kyle Chapman, FX markets analyst at Ballinger & Co in London, said in a note.

Canada is a major producer of commodities, including oil, so the currency tends to be sensitive to shifts in investor sentiment.

The safe-haven U.S. dollar added to recent gains against a basket of major currencies and Wall Street's main indexes dropped after upbeat U.S. retail sales data tempered hopes of the Fed kicking off its rate-cut campaign as early as March.

Inflation in Canada is likely to remain a bigger threat than in the United States due to the high growth in Canadian wages and shelter costs, which could see the central bank shifting to interest rate cuts after the Federal Reserve, say analysts.

Still, domestic data showed producer prices falling by 1.5% in December from November, the largest decline since August 2022.

U.S. crude oil futures were down 0.5% at $72.03 a barrel as a shortfall in China's economic growth compared to expectations stoked worries about energy demand.

Canadian government bond yields rose across the curve. The 2-year was up 14.4 basis points at 4.050%, while the gap between it and the U.S. equivalent was little changed at 32 basis points in favor of the U.S. note.

(Reporting by Fergal Smith; Editing by Kirsten Donovan)