TORONTO: The Canadian dollar softened against its US counterpart on Tuesday, as the greenback strengthened on expectations the Federal Reserve is still on track to hike interest rates before next year and crude prices gave back some of Monday's rally.
Global oil demand worries, combined with excess supply, continue to plague the commodity, with prices remaining volatile.
The Fed held off hiking interest rates last week and scaled back its forecasts for US growth, but the US dollar has since rebounded as investors bet on a rise next month or in December, particularly following comments from Atlanta Fed President Dennis Lockhart.
At 9:36 a.m. EDT (1336 GMT), the Canadian dollar was trading at C$1.3272 to the greenback, or 75.35 US cents, weaker than the Bank of Canada's official close of C$1.3245, or 75.50 US cents.
The currency's strongest level of the session so far was C$1.322, while its weakest level was C$1.329.
Canadian retail sales data for July are due at 8:30 a.m. EDT on Wednesday..
US crude prices were down 2.68 percent to $45.43, while Brent crude lost 2.00 percent to $47.94.
The loonie, which was outperforming most of its key counterparts, is expected to trade between C$1.3250 and C$1.3320 against the US dollar during the North American session on Tuesday, according to National Bank Financial.
Canadian government bond prices were mixed across the maturity curve, with the two-year price up 3 Canadian cents to yield 0.504 percent and the benchmark 10-year rising 50 Canadian cents to yield 1.488 percent.
The Canada-US two-year bond spread narrowed to -18.2 basis points, while the 10-year spread narrowed to -67.1 basis points.
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