The loonie was off 0.08 of a cent to 97.06.
The dollar had been boosted by news from China last week, when that country reported that inflation in July was steady at an annual rate of 2.7 per cent — slightly below an expected modest increase to 2.8 per cent.
The world's second-largest economy had also reported that industrial production rose 9.7 per cent, ahead of expectations for a nine per cent increase, and that retail sales grew 13.2 per cent in July from a year earlier.
But much of that good news had faded by Monday, as Japan reported a 2.6 per cent annualized second-quarter growth rate. The number was below the 3.8 per cent rate recorded in the first quarter and sharply below the 3.6 per cent predicted by analysts.
Investors are concerned that the big monetary stimulus that is being pursued by the Japanese government may not be reaping the rewards that had been hoped for. Japan is trying to come out of a two-decade economic stagnation.
"We saw a little bit of strength in the loonie last week, largely because we saw better than expected Chinese data. The weakness in the Chinese economy that has been prevailing over the last couple of quarters has really dampened commodity prices as well as the outlook for global commodity demand," said Craig Fehr, a Canadian market strategist with Edward Jones in St. Louis, Mo.
He said the dollar is taking cues from overseas economies and commodity prices, because usual drivers of the loonie appear to relatively stable at the moment, including no signs that the Bank of Canada will move on interest rates.
"In the near term, we will continue to get these lumpy, if not, relatively sporadic readings around the world — decent Japanese growth, looks like some stabilization in Europe, weakening Chinese and emerging markets growth — and all of that is kind of putting a tug-of-war on the Canadian loonie in the near term," said Fehr.
On the commodities front, December bullion jumped $22 to US$1,334.20 an ounce.
The September crude contract on the New York Mercantile Exchange saw an uptick of 14 cents to US$106.11 a barrel. Copper was ahead three cents to $3.30.
In the U.S., the Treasury Department reported a $97.6 billion deficit for July but says it remains on track to post its lowest annual budget gap in five years.
July's figure raises the deficit so far for the 2013 budget year to $607.4 billion — 37.6 per cent below the $973.8 billion deficit for the first 10 months of the 2012 budget year.
The Congressional Budget Office has forecast that the annual deficit will be $670 billion when the budget year ends Sept. 30, far below last year's $1.09 trillion. It would mark the first year that the gap between spending and revenue has been below $1 trillion since 2008.
Steady economic growth, higher taxes, lower government spending and increased dividends from mortgage giants Fannie Mae and Freddie Mac have helped shrink the deficit.