TORONTO: The Canadian dollar steadied against its US counterpart on Tuesday, holding near its strongest level in 3-1/2 years as higher commodity prices added to investors' worries about the outlook for inflation.

US stocks fell as speculation that rising inflation pressure could prompt interest rate hikes sooner rather than later dragged on shares.

Canada is a major producer of commodities, including oil. US crude oil futures settled 0.6% higher at $65.28, bolstered by lingering fears of gasoline shortages due to an outage at the largest US fuel pipeline system after a cyberattack.

The Canadian dollar was trading nearly unchanged at 1.2092 to the greenback, or 82.70 US cents, having traded in a range of 1.2079 to 1.2125.

On Monday, it touched its strongest level since September 2017 at 1.2074, helped by the Bank of Canada's shift last month to a more hawkish stance. BoC Governor Tiff Macklem is due to speak on Thursday on "the benefits of an inclusive economy."

Canada has tapped an international bond market for the first time since before the coronavirus crisis, selling $3.5 billion of a 5-year US dollar global bond in a move that could pad its foreign exchange reserves, a term sheet showed.

Canadian government bond yields were higher across the curve, tracking the move in US Treasuries.

The 10-year rose to its highest level since last Wednesday at 1.551% before dipping to 1.541%, up 2.3 basis points on the day.