At 9:12 a.m. ET (1412 GMT), the Canadian dollar was trading at C$1.2782 to the greenback, or 78.24 US cents, down 0.4 percent.

The currency's strongest level of the session was C$1.2714, while it touched its weakest since Nov. 7 at C$1.2784.

Prices of oil, one of Canada's major exports, slipped for a fourth day on a gloomy outlook for oil demand growth from the International Energy Agency.

US crude prices fell 0.99 percent to $55.15 a barrel. World stocks were set for their longest losing streak in more than six months, while the US dollar lost ground against a basket of major currencies amid doubts about prospects for a US tax plan.

US Senate Republicans on Tuesday linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.

On Tuesday, the Canadian government launched a North American Free Trade Agreement challenge of the US Commerce Department's decision earlier this month to impose duties on softwood lumber exports from its northern neighbor.

Canadian government bond prices were higher across a flatter yield curve in sympathy with US Treasuries. The two-year rose 3 Canadian cents to yield 1.445 percent and the 10-year climbed 24 Canadian cents to yield 1.922 percent.

In domestic data, resales of Canadian homes rose 0.9 percent in October from September, the third straight monthly rise.

Canada's manufacturing sales data for September is due on Thursday and the October inflation report will be released on Friday.