The loonie was 0.02 of a cent lower at 95.21 cents US, adding to a slide of almost 1.5 cents US last week.
Traders think there is a good chance that the Fed will start cutting back on its US$85 billion of monthly bond purchases, a move that has kept long-term borrowing rates low and supported a strong rally on many stock markets this year.
But the Fed has been clear that it would only taper its asset purchases if economic conditions allow and on Monday, traders took in a steep drop in durable goods orders.
The U.S. Commerce Department reported that orders fell by a much greater than expected 7.3 per cent. Economists had expected a drop of almost four per cent. The showing followed a 3.9 per cent rise in June thanks in part to strong airplane orders.
Data released Friday had showed a drop in new home sales, raising questions about the strength of the recovery in the U.S. housing market. That led to speculation that the Fed might stick with its current monetary stimulus or only reduce it very gradually.
On the commodity markets, oil prices were slightly lower with the October crude contract on the New York Mercantile Exchange down 50 cents to US$105.92 a barrel.
September copper declined three cents to US$3.32 a pound while December gold faded $2.70 to US$1,393.10 an ounce.
Bond yields have risen since May when Fed chairman Ben Bernanke first mentioned that the central bank could start to taper its asset purchases.
The benchmark 10-year U.S. Treasury has surged about 120 basis points since May to as high as 2.94 per cent last week, although yields have retraced some of that run-up. On Monday, the yield for the 10-year Treasury declined slightly after the durable goods data was released and stood at 2.79 per cent, down about 0.03 of a point from Friday.
Later in the week, traders will look to the latest growth figures from Canada and the U.S.
On Friday, Statistics Canada releases figures for gross domestic product growth in June and the second quarter. Economists expect the data to show GDP contracted 0.5 per cent during the month, in part because of severe flooding in Alberta and a construction sector strike in Quebec.
Stronger growth data is expected from the U.S. The second reading on second-quarter GDP growth comes out on Thursday and economists expect the data to show the economy advanced about two per cent in the second quarter, up from the original reading of 1.7 per cent.Suggest a correction