Loonie Slips as Oil Rally Fuels Rate Worries Ahead of Fed Decision

The Canadian dollar weakened on Tuesday as oil prices surged above $107 a barrel, but the impact was offset by rising U.S. Treasury yields and inflation concerns.

The loonie traded around C$1.2935, near its 12-day low of C$1.3929 reached on Monday.

The sharp rally in crude prices, driven by escalating Middle East tensions, typically supports the Canadian currency as a major oil exporter.

However, this time the increase is also raising expectations for higher interest rates in the United States, which could further support the U.S. dollar and pressure the Canadian currency.