The Canadian dollar clawed back some of its recent declines against its U.S. counterpart on Tuesday as the greenback posted broad-based losses and investors doubted that hefty U.S. tariffs on Canadian goods would be sustained.

A significant impact on Canada's foreign investment inflows could potentially compromise economic growth, creating a bearish outlook for the loonie”

Price action in the Mexican peso and Canadian dollar suggests markets are hopeful U.S. tariffs won't remain in place for long, MUFG Bank's Lee Hardman said in a note. The initial falls in the two currencies look relatively modest given the scale of tariffs,