The Canadian dollar declined against its most major rivals in the European session on Tuesday, as European stocks fell amid growing expectations for the likelihood of a 75 basis point rate hike at the Federal Reserve's policy meeting on Wednesday.

The Fed kicks off its policy meeting later today and will announce its decision on Wednesday.

Traders see a 91 percent chance of a 75 basis point move following Friday's U.S. consumer price index report.

Investors fear that sharper Fed rate hikes to curb high inflation could trigger a recession.

The 2-year and 10-year treasury yield curve briefly inverted on Monday, indicating an upcoming economic recession in the wake of steep rate hikes to slow inflation.

The loonie weakened to a fresh 4-week low of 1.2941 against the greenback, following a high of 1.2866 seen at 2 am ET. The loonie may face support around the 1.32 mark.

The loonie touched a 5-day low of 1.3529 against the euro and an 8-day low of 103.69 against the yen, off its early highs of 1.3409 and 104.70, respectively. The loonie is seen finding support around 1.38 against the euro and 98.5 against the yen.

The loonie, meanwhile, jumped to 0.8899 against the aussie, a level unseen since April 2020. The currency is likely to find resistance around the 0.86 level.

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