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The Canadian dollar weakened against its U.S. counterpart on Tuesday as investors grew more worried about renewed coronavirus lockdowns slowing economic recovery, with the loonie pulling back from a near two-week high the day before.

A five-day charge by world stocks fizzled after pandemic lockdown measures were reimposed in Melbourne, Australia, and large parts of the United States reported tens of thousands of new coronavirus infections.

“The general mood in markets today is more hostile to the Canadian dollar,” said Adam Button, chief currency analyst at ForexLive. “Canada is more tied to the United States than any other currency.”

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Canada sends about 75 per cent of its exports to the United States, including oil. U.S. crude oil futures settled 1 cent lower at $40.62 a barrel, while the Canadian dollar was down 0.5 per cent at 1.3608 to the greenback, or 73.69 U.S. cents.

Among G10 currencies, only the Norwegian crown lost more ground. The loonie, which on Monday notched its strongest intraday level since June 23 at 1.3616, traded in a range of 1.3525 to 1.3609.

Adding to headwinds for the loonie was news on Monday that the U.S. Supreme Court rejected a request from President Donald Trump’s administration to allow construction to start on Keystone XL, a planned oil pipeline running from Alberta to Nebraska.

“The outlook for Canadian oil exports to the United States is darkening and we are seeing that reflected in the Canadian dollar today,” Button said.

Still, Ivey Purchasing Managers Index (PMI) data showed signs of economic recovery, with Canadian purchasing activity expanding in June for the first time in four months.

Canadian government bond yields eased across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 3 basis points at 0.515 per cent.

Canadian Finance Minister Bill Morneau is due to present a fiscal snapshot on Wednesday.

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