Loonie down but makes move off three-week low

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(Reuters)

By Frank Pingue

TORONTO (Reuters) - Canada's dollar was slightly weaker versus the U.S. currency early on Tuesday, sitting near the three-week low reached in the overnight session, as the impact from Bank of Canada comments lingered.

In Monday's session, Bank of Canada Governor Mark Carney added to an already cautious tone when he reiterated a warning he gave last week that the Canadian currency's rally toward par with the greenback was a risk to growth.

The comments were followed by remarks from Canadian Finance Minister Jim Flaherty, who said one way to cut the value of the currency was for the central bank to engage in quantitative easing.

The Canadian dollar fell as low as C$1.0718 to the U.S. dollar, or 93.30 U.S. cents, overnight, which marked the second straight day it touched a three-week low. But the slide was contained somewhat by a weaker U.S. dollar.

"We've got the U.S. dollar which yesterday looked like it was all set to throw off the shackles of the bears, but instead it got weighed down again overnight," said David Watt, senior currency strategist RBC Capital Markets. "But there just didn't seem to be much reason to buy the Canadian dollar overall."

At 7:40 a.m. (1140 GMT), the Canadian unit was at C$1.0687 to the U.S. dollar, or 93.57 U.S. cents, down from C$1.0670 to the U.S. dollar, or 93.72 U.S. cents, at Monday's close.

The commodity backdrop was somewhat positive as gold prices edged off a three-week low while oil prices moved above $79 a barrel after three sessions of decline. Commodity prices often influence the Canadian dollar given the nature of Canada's exports.

Domestic bond prices, which all retreated in the previous session, were higher across the curve alongside the bigger U.S. Treasury market as investors went bargain hunting.

(Editing by Theodore d'Afflisio)