Canadian currencyAdam Korzekwa adam@korzekwa./Getty Images/iStockphoto
The Canadian dollar fell more than one-third of a U.S. cent Tuesday as the U.S. dollar picked up strength against most currencies while commodity prices were little changed.
The loonie closed down 0.37 of a cent to 97.64 cents (U.S.).
The Canadian currency had registered a sharp gain Monday, rising almost two-thirds of a U.S. cent as the greenback sold off after a weekend meeting of Group of 20 countries where finance ministers made a commitment to avoid a currency war.
However, analysts say the U.S. dollar could come under renewed selling pressure ahead of Nov. 3, when the U.S. Federal Reserve makes its next announcement on interest rates.
Investors believe the Fed will also announce another round of quantitative easing at that time, which involves the central bank buying up government bonds to inject more cash into the struggling U.S. economy. However, increasing the supply of dollars also opens the currency to further weakness.
Analysts say much depends on the level of stimulus that is being planned by the Fed.
"Less stimulus will probably strengthen the U.S. dollar while more will weaken the Yankee dollar," said Bob Tebbutt, vice-president at Peregrine Financial Group Canada.
Oil prices moved between small losses and small gains on Tuesday with the December oil contract on the New York Mercantile Exchange added 3 cents to $82.55 a barrel.
Over the past two months, the U.S. dollar has depreciated sharply because investors are preparing for a stimulus move from the Fed. Against six major world currencies, it has fallen more than seven per cent since late August, when Fed chief Ben Bernanke first hinted at the Fed's plans.