TORONTO: The Canadian dollar weakened to its lowest level in nearly two weeks against its US counterpart on Wednesday ahead of an interest rate announcement by the Bank of Canada and as the rally in global equity markets stalled.

The loonie was last trading 0.2% lower at 1.2410 to the greenback, or 80.58 US cents, after touching its weakest intraday level since Oct. 14 at 1.2428.

"The CAD is under modest pressure due to the weak risk tone in markets," strategists at Scotiabank said in a note.

A flare up in US-China tensions helped douse the equity market rally, offsetting tailwinds from forecast-beating earnings on Wall Street.

Canada is a major exporter of commodities, including oil, so the loonie tends to be sensitive to investor risk appetite.

US crude prices were down 1% at $83.77 a barrel after industry data showed crude oil stockpiles rose more than expected.

Canadian dollar rises on positive investor sentiment

The BoC could become the first central bank from a G7 country to end stimulus from its pandemic-era bond-buying program. The interest rate decision, along with an update on the central bank's economic forecasts, is due at 10 a.m. (1400 GMT).

The bank has pledged to keep rates at a record low 0.25% until economic slack is absorbed, which would happen in the second half of 2022 in its latest forecast. But money markets have moved in recent weeks to price in a hike by April.

"We expect the statement to push back against market pricing for an earlier start to the rate tightening cycle," the Scotiabank strategists said.

Canadian government bond yields were mixed across a flatter curve. The 2-year rose 3.1 basis points to 0.898%, nearly its highest since March last year, while the 10-year was down 1.9 basis points at 1.609%.