President Donald Trump's warning that North Korea faced "fire and fury," and Pyongyang's threat of possible retaliation, drove investors out of stocks and into the yen, Swiss franc, gold and government debt.

Commodity-linked currencies, such as the Canadian dollar, which are sensitive to global trade, also lost ground.

At 9:08 a.m. ET (1308 GMT), the Canadian dollar was trading at C$1.2693 to the greenback, or 78.78 US cents, down 0.2 percent.

The currency traded in a range of C$1.2666 to C$1.2708. It touched on Monday its weakest in three weeks at C$1.2715.

Canadian housing starts rose in July to a seasonally-adjusted annual rate of 222,324 from June's upwardly revised 212,948, data from the Canada Mortgage and Housing Corporation showed. Economists had expected a 205,000 annual rate.

The value of Canadian building permits unexpectedly rose in June, up 2.5 percent, on increased plans for commercial buildings, separate data from Statistics Canada showed.

US crude  prices were up 0.92 percent at $49.62 a barrel ahead of a US inventory report, which is expected to show crude stocks dropped for a sixth week. Oil is one of Canada's major exports.

A US proposal for Mexico and Canada to vastly raise the value of online purchases that can be imported duty-free from stores like Amazon.com and eBay is emerging as a flashpoint in an upcoming renegotiation of the NAFTA trade deal.

The gap between the 2-year yield and the 10-year yield narrowed by 2.8 basis points to a spread of 65 basis points, its narrowest since July 24, as longer-dated bonds outperformed.