The commodity-sensitive loonie slipped 0.18 of a cent to 101.06 cents US amid lower prices for oil and metals.
The latest regional survey by the Fed said the pace of economic growth is expanding. It also pointed to rising retail sales and loan demand while housing markets are showing signs of improvement across most areas.
On the negative side, the so-called Beige Book noted that the worst drought in decades is impacting farm output in the Midwest and there was some general softening in the manufacturing area because of weak growth in Europe and Asia.
Traders had earlier taken in other data showing a second estimate of second-quarter gross domestic product suggested the U.S. economy grew at an annualized rate of 1.7 per cent, up from the original reading of 1.5 per cent.
And another report provided further evidence of a housing recovery as Americans signed more contracts to buy homes in July than at any other point in the last two years. The National Association of Realtors’ index of sales agreements for previously occupied homes jumped 2.4 per cent in July to 101.7.
Traders looked ahead to a key speech Friday by Fed chairman Ben Bernanke at the Fed's annual retreat at Jackson Hole, Wyo. Expectations for another round of economic stimulus have risen over the past couple of weeks after the minutes from the Fed's last interest rate meeting Aug. 1 showed more members wanting to see the central bank take more action to revive the economy.
But those expectations have taken place against a background of steadily improving economic data, including better than expected job creation numbers, improved retail sales and more indications of an improving housing sector.
There was still some dismay Tuesday over data showing slipping consumer confidence in the summer prompted by employment worries.
Still, there are doubts Bernanke would commit to more stimulus ahead of important data next week, including the latest snapshot of the manufacturing sector and the August non-farm payrolls report at the end of the week. The Fed holds its next interest rate announcement Sept. 13.
Also, it is thought the Fed would want to see if the European Central Bank unveils measures on Sept. 6 to lower borrowing costs for the most troubled eurozone countries, such as Spain.
Oil price declines accelerated amid data showing a big increase in U.S. crude supplies last week. The Energy Information Administration reported an increase of 3.8 million barrels in crude stockpiles versus an expected decrease of two million barrels. The EIA also reported gasoline inventories down 1.5 million in the week, less than the two million barrels that had been forecast.
The October crude contract on the New York Mercantile Exchange lost 84 cents to US$95.49 a barrel.
Copper prices also stepped back, down for a fourth session as September copper dropped two cents to US$3.44.
Bullion lost $6.70 to US$1,663 an ounce.Suggest a correction