The Canadian dollar fell against its U.S. counterpart on Tuesday, one day after a major energy sector acquisition that could have supported the Canadian currency, and ahead of a fiscal update from Prime Minister Mark Carney's government.

The Canadian dollar dropped 0.4% to 1.3680 CAD per U.S. dollar, or 73.10 U.S. cents, after moving within a range between 1.3614 and 1.3691. On Monday, it had recorded its highest level in nearly seven weeks at 1.3595.

Shaun Osborne and Eric Theoret, strategists at Scotiabank, noted that news of mergers and acquisitions may have supported the Canadian dollar yesterday, but had less impact today as it declined alongside its major currency peers.

On Monday, the British company Shell announced it had agreed to purchase the Canadian energy firm ARC Resources in a deal valued at 16.4 billion dollars. Analysts viewed this as a significant confirmation of the Canadian energy sector's attractiveness as an investment destination, particularly given what they described as the Canadian government's trend toward supporting growth in the sector.

The Canadian fiscal update, expected after 4 p.m. ET (2000 GMT), is anticipated to show an improvement in the budget deficit and higher revenues for the past fiscal year. However, economists expect that gains from rising oil prices may have been partially offset by weak consumer spending and new government spending measures.

The Canadian real estate market continues its longest decline in decades, putting pressure on household spending, although the local stock market sitting at record levels has helped create additional wealth estimated at hundreds of billions of dollars.

In currency markets, the U.S. dollar rose against a basket of major currencies as investors focused on central bank decisions. Both the U.S. Federal Reserve and the Bank of Canada are expected to keep interest rates unchanged on Wednesday.

Additionally, the price of oil, one of Canada's most important exports, rose 3.4% to 99.61 dollars per barrel as efforts to end the war in Iran continue to stall, keeping the Strait of Hormuz largely closed. Conversely, the United Arab Emirates announced it would leave OPEC and the OPEC+ alliance, which eased some supply-related concerns.

In bond markets, Canadian yields rose across the curve, tracking their U.S. counterparts. The 10-year yield rose by 2.7 basis points to reach 3.530%, after earlier touching its highest level since April 7 at 3.546%.