Canadian dollar rallies as Poloz tempers rate cut expectations

Mon Oct 24, 2016 5:23pm EDT
 
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a fresh seven-month low against its U.S. counterpart on Monday, before rallying after the Bank of Canada's official close as comments by the central bank's governor tempered expectations for interest rate cuts.

The decision on whether to cut rates again is not one to take lightly, said Bank of Canada Governor Stephen Poloz, who was taking questions from lawmakers.

A wait-and-see approach from the central bank has left the market scaling back expectations for rate cuts, said Jack Spitz, managing director of foreign exchange at National Bank Financial.

The loonie has been on the backfoot since the Bank of Canada acknowledged last week that it had considered cutting interest rates at its policy meeting.

The combination of a more dovish Bank of Canada and an expected Federal Reserve interest rate hike in December does not bode well for the Canadian dollar, said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

U.S. crude oil futures CLc1 settled 33 cents lower at $50.52 a barrel, pressured by news of the impending restart of Britain's Buzzard oilfield. [O/R]

The Canadian dollar CAD=D4 ended at C$1.3386 to the greenback, or 74.70 U.S. cents, weaker than Friday's official close of C$1.3327, or 75.04 U.S.

The currency's strongest level of the session was C$1.3324, while it touched its weakest point since March 16 at C$1.3398.   Continued...

 
A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015.     REUTERS/Mark Blinch