The Canadian dollar extended its gains against the US dollar on Tuesday, as the greenback remained shaky ahead of two-day meeting of Federal Open Market Committee (FOMC).

USD/CAD fell to 0.9531 during early New York trading, compared with Monday’s close of 0.9546.

“Domestic US considerations versus conditions elsewhere suggest some further downside, with a focus on key event risks - the FOMC and Bernanke's press conference. An outbreak of risk aversion could prop dollar, but such outbreaks tend to fade, and are not the fodder for a sustained USD rally,” said a note from RBC Capital Markets on Tuesday.

Analysts expect FOMC's April statement to be similar to that of March, with Fed reasserting its view that the recent acceleration in headline inflation will eventually prove transitory.

“RBC does not expect much from the FOMC or Bernanke this week, instead expecting the 22 June FOMC and press conference to provide more details on the post-QEII behaviour of the Federal Reserve,” it added.

Traders also await US gross domestic product (GDP) rate in the first quarter on Thursday, which is expected to have grown at a more moderate pace, following a 3.1 percent increase in the last quarter of 2010.

“Real Q1 GDP looks poised to decelerate towards 2% with strong nominal personal consumption gains eaten away by sharper than expected inflation in the quarter,” said RBC Capital Markets.

Elsewhere, the euro climbed to a 16-month high against the dollar, after a strong Spanish auction of treasury bills eased concerns that the country will need a bailout.

EUR/USD was up 0.4 pct at 1.4634, after pulling up from a session low at 1.4494.

The dollar index, a measure of performance of the greenback against six other major currencies, was down 0.2 percent at 73.582.