The Canadian dollar weakened to its lowest level in nearly four weeks against its U.S. counterpart on Wednesday, as global stock markets added to their recent declines and investors awaited a decision on interest rates from the Bank of Canada.

The BoC is expected to announce its first half-point interest rate hike in more than 20 years as the central bank accelerates its tightening schedule to address an overheating economy, analysts said.

The bank may also announce the start of quantitative tightening, allowing the large share of government bonds it amassed during the pandemic to shrink as they mature.

The reduction in its share of the bond market could transmit monetary policy more effectively to the economy, as borrowing costs tend to be driven by the economy's financial system.The reduction in its share of the bond market could transmit monetary policy more effectively to the economy, as borrowing costs tend to be determined by longer-term rates rather than the very short-term rate set by the BoC.

The Canadian dollar was trading 0.2 percent lower at 1.2670 to the greenback, or 78.93 U.S. cents, after touching its lowest intraday level since March 17 at 1.2674.

The loonie's decline came as the safe-haven U.S. dollar rose against a basket of major currencies, while global stocks fell for a fourth day as investors weighed the outlook for inflation.

Supply concerns amid Russia's invasion of Ukraine helped push up the price of oil, one of Canada's top exports. The price of U.S. crude was up 1.5 per cent at $102.14 per barrel.

Canadian government bond yields fell across the curve, following the movement of U.S. Treasuries. The 10-year rate fell 1.7 basis points to 2.629 percent, after hitting its highest intraday level in more than eight years on Tuesday at 2.735 percent.