TORONTO: The Canadian dollar edged lower against its U.S. counterpart on Tuesday as the rally in equity markets lost some momentum, but the currency stuck to its recent trading range as investors awaited a Bank of Canada interest rate decision this week.
European stocks eased after regional business activity data reinforced expectations that the European Central Bank will raise rates by a further 50 basis points, while U.S. stock index futures pointed to a lower open on Wall Street following strong gains in the previous two sessions.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in investor sentiment.
U.S. crude oil futures were little changed at $81.64 a barrel as concerns about a global economic slowdown and expected build in U.S. oil inventories were offset by hopes of a fuel demand recovery from top importer China.
The Canadian dollar was trading 0.1% lower at 1.3380 to the greenback, or 74.74 U.S. cents, after moving in a range of 1.3347 to 1.3391.
The currency has largely traded in a sideways pattern after notching a seven-week high at 1.3320 earlier this month.
Money markets see a roughly 70% chance that the Bank of Canada will raise its benchmark interest rate by 25 basis points to a 15-year high of 4.50% at a policy announcement on Wednesday.
The central bank will offer minutes from its policy-setting meeting for the first time in its history, a move some analysts say will help restore credibility lost last year amid soaring inflation and encourage out-of-the-box thinking.
Canadian government bond yields were lower across the curve. The 10-year fell 1.8 basis points to 2.872%, after touching on Monday its highest intraday level in one week at 2.904%.