TORONTO: The Canadian dollar retreated against its US counterpart on Tuesday, weighed by oil prices that weakened on a report that crude stocks could approach record highs.
The International Energy Agency (IEA) said in its monthly report that oil supplies remained abundant and it would take time for investment cuts to make more than a relatively small dent in production, keeping prices low.
As a major oil exporter, the Canadian dollar's moves in recent months have largely been driven by hefty losses in crude prices.
"(Weaker oil) would definitely be what's creating this jitteriness," said Camilla Sutton, chief currency strategist at Scotiabank.
"For the Canadian dollar, we're kind of flip-flopping in this range ... and we're still unable to break out of that broader range from the third of February."
The loonie, which has had a run of volatile sessions in recent weeks, traded between C$1.2353 and C$1.2645 on Feb. 3.
At 9:38 a.m. ET (1438 GMT), the Canadian dollar was at C$1.2510 to the greenback, or 79.94 US cents, softer than Monday's close of C$1.2465, or 80.22 US cents.
A stronger greenback, powered by broadly higher US Treasury yields, added pressure on the loonie, which was underperforming many of its major counterparts.
Earlier on Tuesday, Bank of Canada Governor Stephen Poloz said in an interview that he has not been talking down the Canadian dollar, saying it has fallen because of economic developments, particularly the collapse in oil prices.
The Canadian dollar has been hit hard by diverging monetary policies between the United States, which is widely expected to hike interest rates this year, and Canada, which cut rates last month and is expected to do so again this spring.
Canadian government bond prices were mixed across the maturity curve, with the two-year flat, with a yield of 0.486 percent and the benchmark 10-year down 21 Canadian cents to yield 1.456 percent.
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