The Canadian dollar weakened on Monday against its US counterpart as oil prices fell and the greenback posted broader gains, while investors awaited the start of renegotiations of the NAFTA trade pact this week. Prices of oil, one of Canada's major exports, fell as a slowdown in Chinese refining raised concerns about demand for crude in the Asian country.
The US dollar edged higher against a trade-weighted basket of currencies after posting its biggest weekly drop in three weeks as expectations of US interest rate increases dwindled further after weak inflation data. US crude prices were down 0.45 percent at $48.60 a barrel.
The Canadian government's goals for talks on modernizing the North American Free Trade Agreement include preserving the pact's dispute-settlement mechanism, Foreign Minister Chrystia Freeland said, setting up a potential clash with the United States. At 9:16 am ET (1316 GMT), the Canadian dollar was trading at C$1.2704 to the greenback, or 78.72 US cents, down 0.2 percent.
The currency traded in a range of C$1.2675 to C$1.2716. On Friday, the loonie touched its weakest in four weeks at C$1.2753. Still, speculators have increased bullish bets on the loonie to the highest level since January 2013, according to data from the US Commodity Futures Trading Commission and Reuters calculations on Friday.
Canadian dollar net long positions rose to 62,821 contracts as of August 8 from 40,638 contracts a week earlier. Tension on the Korean peninsula eased slightly and risk-sensitive assets, such as stocks, rallied as US officials played down the risk of an imminent war.