Canadian dollar tumbles to one-week low; Poloz says rate cut 'on the table'

Wed Jan 18, 2017 1:35pm EST
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Wednesday as oil fell and Bank of Canada Governor Stephen Poloz kept alive prospects of an interest rate cut.

At a press conference following the central bank's interest rate announcement Poloz said a rate cut "would remain on the table for as long as downside risks are still present."

The remark pressured the loonie to its weakest since Jan. 11 at C$1.3235 to the greenback. It was at C$1.3090 before the press conference began.

"The market understood that even though (the central bank) revised its forecast higher that it still had a rate cut at the back of its mind," said Jimmy Jean, senior economist at Desjardins.

The central bank held its policy rate steady at 0.50 percent, as expected, saying the big unknown of what policies U.S. President-elect Donald Trump will enact makes it prudent to wait and see.

"I think what this (interest rate announcement) really hammers home is that they are in no mood to raise interest rates this year," said Andrew Kelvin, senior rates strategist at TD Securities.

The implied probability of a Bank of Canada rate hike by the end of the year fell to 30 percent from 40 percent before the announcement, data from the overnight index swaps market showed. BOCWATCH

At 1:13 p.m. ET (1813 GMT), the Canadian dollar CAD=D4 was trading at C$1.3216, or 75.67 U.S. cents, much weaker than Tuesday's close of C$1.3058, or 76.58 U.S.   Continued...

Bank of Canada Governor Stephen Poloz speaks during a news conference in Ottawa, Ontario, Canada, January 18, 2017. REUTERS/Chris Wattie