TORONTO: The Canadian dollar on Tuesday weakened against its U.S. counterpart and all the other G10 currencies, as oil prices fell and investors weighed prospects of the Bank of Canada turning more dovish at an interest rate decision this week.
The loonie was trading 0.9pc lower at 1.2647 to the greenback, or 79.07 U.S. cents, the biggest decline among G10 currencies.
The loonie touched its weakest intraday level since Aug. 31 at 1.2652.
"The market is having doubts about the strength of the (Canadian) economy and whether the Bank of Canada will continue to taper," said Adam Button, chief currency analyst at ForexLive.
The Bank of Canada is expected to keep interest rates on hold at a record low of 0.25pc on Wednesday and to wait until October before cutting its bond purchases further, a Reuters poll of economists showed.
Canada's economy unexpectedly shrank in the second quarter as shortages of microchips and other inputs curtailed trade in motor vehicles and domestic consumption.
Canadian dollar adds to this week’s gains
"There's a growing fear that supply chain bottle necks could dramatically dampen growth for many months to come," Button said.
The price of oil, one of Canada's major exports, was pressured by concerns about weak demand in the United States and Asia as well as a strong U.S. dollar.
U.S. crude oil futures settled 1.4pc lower at $68.35 a barrel, while the greenback rallied against a basket of major currencies, bolstered by rising U.S. Treasury yields.
Canadian government bond yields also moved higher as the Canadian market reopened following Monday's Labour Day holiday.
The 10-year was up 4.4 basis points at 1.232pc.
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