Recent gains for the currency were pared after making a near nine-month high at C$1.2750 on Tuesday.
The loonie has rebounded 15 percent from a 12-year low in January, supported by a partial recovery in oil prices, the Canadian government's plan for fiscal stimulus, a run of better-than-expected economic data at the start of the year and sharply reduced expectations for Bank of Canada rate cuts.
The implied probability of a Bank of Canada interest rate cut this year has dropped to less than 10 percent from more than 50 percent at the start of March.
The interest rate announcement at 10:00 a.m. EDT (1400 GMT) is widely expected to result in the Bank of Canada's policy rate being held at 0.5 percent.
The central bank is expected to raise its growth forecasts, which will also incorporate the anticipated impact from the new Liberal government's recently announced stimulus measures. But market players predict Governor Stephen Poloz will use a press conference at 11:15 a.m. EDT (1515 GMT) to talk up economic risks and play down signs of stronger growth in order to help keep a recovering currency from choking off exports.
US crude prices were down 1 percent to $41.75 a barrel on concerns that a producer meeting set for Sunday will do little to trim oversupply.
At 9:12 a.m. EDT (1312 GMT), the Canadian dollar was trading at C$1.2803 to the greenback, or 78.11 US cents, weaker than Tuesday's close of C$1.2759, or 78.38 US cents.
The currency's weakest level was C$1.2818, while its strongest was C$1.2750, matching the near 9-month high reached on Tuesday.
Global stocks rose on after surprisingly upbeat Chinese trade data offered hope Asia's biggest economy is finally stabilizing, boosting risk appetite.
However, US retail sales unexpectedly fell in March as households cut back on purchases of automobiles, further evidence that economic growth stumbled in the first quarter.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 0.5 Canadian cent to yield 0.585 percent and the benchmark 10-year rising 6 Canadian cents to yield 1.286 percent.
The 10-year yield touched its highest since March 28 at 1.305 percent.