The loonie was off the worst levels of the session but still down 0.27 of a cent to 92.56 cents US, its lowest close since late October 2009, after falling more than a cent Tuesday. It had gone as low as 92.35 cents US in morning trading.
Payroll firm ADP reported the U.S. private sector created 238,000 jobs in December. That data came two days before the release of the U.S. government's employment report for last month. Economists expect that report will show the economy created about 195,000 jobs in total.
Meanwhile, minutes from the latest Federal Reserve meeting in December shed little light on how fast the central bank will accelerate the winding up of stimulus.
At that meeting, Fed officials decided to start cutting back on the central bank's US$85 billion of monthly bond purchases by $10 billion starting this month, with the agenda for further tapering dependent on economic data. But traders had hoped the minutes from that meeting would offer some clues on the pace of further tapering and now the focus has shifted to Friday and the release of the government's employment report for December.
The ADP report was the second positive reading on U.S. employment this week. On Monday, the Institute for Supply Management said its index for the non-manufacturing sector in January showed continuing expansion but at a slower pace. However, it also showed a strong move upward in its employment index.
The Canadian dollar weakness Tuesday was partly ascribed to speculation about Fed tapering, but the loonie also faced an increase in the Canadian trade deficit for November. At the same time, other data showed the U.S. trade deficit dropped 12.9 per cent to US$34.3 billion in November to its lowest level in four years as exports rose 0.9 per cent, aided by a 5.6 per cent rise in petroleum exports. Imports, including Canadian crude oil, dropped 1.4 per cent.
Meanwhile, Bank of Canada governor Stephen Poloz doesn’t appear in any hurry to raise the Bank of Canada's trend-setting rate. In an interview on CBC on Tuesday, he denied he was under international pressure to raise rates.
Federal Finance Minister Jim Flaherty suggested in a recent interview that there would be such pressure as a result of Fed tapering.
Poloz did say that Fed tapering will inevitably put pressure on Canadian bond yields, likely leading to an increase in long-term fixed mortgage rates even if the Bank of Canada does not increase its benchmark rate.
On the commodity markets, the February crude oil contract on the New York Mercantile Exchange was $1.34 lower to US$92.33 a barrel.
The March copper contract declined two cents to US$3.34 a pound while the February gold bullion contract slipped $4.10 to US$1,225.60 an ounce.