The loonie has declined to its lowest level since July as currency traders weighed the future direction of the Canadian economy.

The Canadian dollar's official Bank of Canada close on Tuesday was 101.34 cents US, down .70 of a cent.

Earlier in the day, it was down as much as .74 of a U.S. cent, a level it hasn't seen since July 23.

Traders debated whether comments by Bank of Canada governor Mark Carney on Monday suggested that the Bank might cut its forecast for Canadian growth and put off raising interest rates.

In a speech in Nanaimo, B.C., Carney left out an often-repeated phrase that "modest withdrawal of the present considerable monetary policy stimulus may become appropriate."

Scotiabank chief currency strategist Camilla Sutton said Carney's decision to drop the more hawkish tones reinforced the notion that global economic uncertainty is having an effect on Canada.

McGuinty resignation a possible factor

"Accordingly, in line with our expectations, it is likely that the [Bank of Canada] adopts a more neutral stance at its upcoming meeting," she wrote in a note.

The loonie may also have been weighed down by political uncertainty in Ontario after premier Dalton McGuinty said yesterday he would step down. McGuinty was unable to implement budget cuts.

As well, the Bank of Canada’s latest Business Outlook, released Monday, showed a general easing of expectations for sales, investments and hiring.

On most questions in the survey, business executives were more pessimistic than they had been three months ago.

For sales expectations, there were as many who anticipated volumes to slow from the pace of the previous 12 months as pick up, only the second time since mid-2009 that expectations were not positive.

With files from The Canadian Press