Sequence alignment of extended IUPAC sequences I want to align a short sequence to a reference, and both are encoded in the extended IUPAC notation (i.e. 16 letters).

What alignment software can I use for that?

For example, in Bowtie "all non-A/C/G/T characters in reads become Ns", so it ignores which extended letters are matching.
You can try using Biostrings, depends on how large is your reference, if it is small, you can just pairwiseAlignment with the nucleotideSubstitutionMatrix which supposedly :

library(Biostrings)
data(phiX174Phage)

x = DNAString("TCCAWRSCGCAGAAGT")

lapply(phiX174Phage,function(y)pairwiseAlignment(x,y,
substitutionMatrix = nucleotideSubstitutionMatrix()))

$Genbank
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 

$RF70s
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 

$SS78
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 

$Bull
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 

$G97
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 

$NEB03
Global PairwiseAlignmentsSingleSubject (1 of 1)
pattern: -------------TCCAWRSCGCAGAAGT...----------------------------
subject: GAGTTTTATCGCTTCCATGACGCAGAAGT...TAAAAATGATTGGCGTATCCAACCTGCA
score: -21491.92 


If it is much larger, you can convert the sequence of interest to a pwm and find it in the reference fasta, like shown in this example