TORONTO: The Canadian dollar weakened to an eight-day low against its US counterpart on Tuesday as the greenback broadly climbed and investors saw potential for the Bank of Canada to try to slow the currency's recent rally.
The loonie has been the top-performing G10 currency this year as Canada's economy showed signs of picking up in recent months and traders bet that Bank of Canada Governor Stephen Poloz would cut interest rates at a slower pace than the Federal Reserve.
"There could still be some trade-related threats for Canada and on that basis he (Poloz) may just want to cool down the market," said Amo Sahota, a director at Klarity FX in San Francisco.
A stronger loonie could make Canada's exports less competitive, hurting the country's economy.
The US dollar gained against a basket of major currencies as investors reassessed their expectations of how much the Fed may cut interest rates this month.
Fed Chief Jerome Powell is due to testify before Congress on Wednesday.
The price of oil, one of Canada's major exports, was supported by Middle East tensions and OPEC supply cuts. US crude oil futures settled 0.3pc higher at $57.83 a barrel.
At 4:14 p.m. (2014 GMT), the Canadian dollar was trading 0.2pc lower at 1.3129 to the greenback, or 76.17 US cents. The currency touched its weakest intraday level since July 1 at 1.3141.
Speculators have turned bullish on the Canadian dollar for the first time since March 2018, data from the US Commodity Futures Trading Commission and Reuters calculations showed on Monday.
As of July 2, there were 6,293 contracts net long the loonie, a swing from 14,790 contracts net short the currency in the prior week.
Canadian housing starts rose much more than expected in June, to a seasonally adjusted annualized rate of 245,657 units, the Canadian Mortgage and Housing Corp (CMHC) said.
The 10-year yield touched its highest intraday since May 30 at 1.594pc.