The Canadian dollar ended flat against a steady U.S. counterpart on Tuesday after touching a near eight-week high, as investors braced for the U.S. Federal Reserve to hike interest rates on Wednesday and provide direction on its future monetary policy.

The loonie has gained steadily in recent weeks on the back of higher prices for oil, a major Canadian export.

The greenback has also gained against a basket of currencies in that time.

Fed fund futures show a 97 per cent probability that the U.S. central bank would lift rates by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday, according to the CME Group.

"It's already about the next move, when does it happen, and why does the Fed take us there," said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.

"If the Fed happens to deliver even a bit of minor dovish rhetoric, I think you're going to see a really quick move in many markets where people look to take profit," he said.

But Schruder said the loonie might not gain from flows out of the U.S. currency, which he said would likely be used to buy the Japanese yen and the euro instead.

"I think that [the Canadian dollar] has the potential to turn a couple of pennies higher from here" in the immediate aftermath of the Fed news, he said.

Oil prices edged off earlier gains to end Tuesday nearly unchanged, as the support from a plan by the Organization of the Petroleum Exporting Countries to limit production were undercut by an energy watchdog's assessment of how much those nations are currently producing.

The loonie settled at $1.3133 to the greenback, or 76.14 U.S. cents, one pip stronger than Monday's close of $1.3134, or 76.14 U.S. cents.

The currency traded in a tight range of $1.3139 to $1.3102, its strongest level since Oct. 19.

Canadian government bond prices slipped across the yield curve, with the two-year down three Canadian cents to yield 0.777 per cent and the benchmark 10-year slipping back eight Canadian cents to yield 1.756 per cent. It had earlier touched its highest intraday level since July 2015 at 1.781 per cent.