The loonie was up 0.68 of a cent at 101.48 cents US. On Monday, it had sunk as low as 99.73 cents US, its lowest level since Jan. 31, before recovering to close above par with the American dollar.
Meanwhile, commodity prices regained some ground.
Gold added $16.80 to US$1,830.10 an ounce after closing Monday's session down nearly $50.
Crude oil gained $2.02 to US$90.21 a barrel as a weaker U.S. dollar and expectations of falling U.S. stockpiles of crude oil and gasoline outweighed new forecasts of fragile global demand.
Copper was unchanged at US$3.97 a pound.
The Bank of Nova Scotia warned Tuesday that Canada could be among the first of the world's advanced economies to fall into a another recession.
The bank's economists say Canada could produce a second negative quarter in the three-month period ending this month. That would constitute a technical recession, defined as two quarters of negative growth. Canada's economy contracted by 0.4 per cent in the April-June period.
Statistics Canada reported that the net worth of Canadian households fell for the first time in a year last spring and indebtedness grew. Household worth fell 0.3 per cent to $184,300 in the second quarter, the first reversal of fortune since the second quarter of 2010.
And TD Economics revised its outlook for Canadian economic growth down to 2.2 per cent this year, about half a percentage point lower than in its June forecast.
"The main risks to our base-case outlook remain largely external. The global economy could turn out to be weaker than projected if policy-makers in the U.S. and Europe fail to deal with their fiscal problems," TD said.
The loonie will continue to trade mostly on sentiment about the broader global economy ahead of Canadian data to be released later this week on capacity utilization, manufacturing sales and international securities transactions.
European debt continues to be the main concern driving investors away from riskier currencies like the Canadian dollar and toward perceived safe havens like gold and the U.S. dollar.
Confirmation that Italy's finance minister had discussions with China's sovereign wealth fund last week amid speculation that Rome is looking to persuade Beijing to buy its bonds was also impacting markets.
However, fear that Greece will soon run out of cash remains the driver in the markets.
"We are still taking our cue from global market sentiment, which remains focused on Europe and global growth," said John Curran, senior vice-president at CanadianForex.
"This will eventually take its toll on the Canadian dollar, as we will not be immune to another global economic downturn."