TORONTO: The Canadian dollar weakened to its lowest level in nearly a week against its US counterpart on Tuesday, as oil prices fell and investors grew cautious ahead of an expected reduction of economic stimulus by the Federal Reserve.

The loonie was trading 0.3% lower at 1.2398 to the greenback, or 80.66 US cents, having touched its weakest level since last Wednesday at 1.2417.

The decline for the currency came as Australia's dollar was pressured by a more dovish than expected tone from the Reserve Bank of Australia, in the first of several meetings of central banks this week.

The Fed is expected on Wednesday to say it will start to taper bond purchases, though markets' focus is on clues about interest rates liftoff.

Last week, the Bank of Canada said it could hike rates as soon as April, three months earlier than previously thought.

Canadian dollar steadies as speculators turn bullish on the currency

Expectations of a rise in US crude inventories weighed on the price of oil, one of Canada's major exports. US crude prices were down 1.1% at $83.12 a barrel.

The value of Canadian building permits rose by 4.3% in September from August, beating estimates for a 3.1% increase, data from Statistics Canada showed.

The Canadian employment report for October, due on Friday, can offer further clues about the strength of the domestic economy.

The Canadian 10-year yield was little changed at about 1.750%, after touching on Monday its highest intraday level since May 2019 at 1.766%.