3 Min Read
* C$ at C$1.0491 vs US$, or 95.32 U.S. cents * Poloz comments bolster view of low rates for longer * Bond prices mixed across the curve By Leah Schnurr TORONTO, Nov 21 (Reuters) - The Canadian dollar weakened against the greenback on Thursday as comments from the head of the Bank of Canada bolstered an expectation that interest rates will remain low for some time. In an appearance before a Senate committee late on Wednesday, Bank of Canada Governor Stephen Poloz said the central bank's economic analysis differed from that of the Organization of Economic Cooperation and Development (OECD), which recommended that it start raising interest rates as soon as 2014. Last month, the central bank surprised markets with a major shift in policy, dropping any mention of an eventual rise in rates after 18 months of explicitly stating that rate hikes were on the horizon. "They don't agree, essentially, with what the OECD was projecting, (which is) higher rates at the end of 2014," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets in Toronto. "(Poloz) more or less said that, or implied it at least, and that's driving short-term rates a little lower in Canada and that's weakening the dollar this morning." A recent Reuters poll of primary dealers showed the Bank of Canada is expected to keep its key rate at 1 percent well into 2015. The Canadian dollar was at C$1.0491 versus the U.S. dollar, or 95.32 U.S. cents, weaker than Wednesday's North American close at C$1.0447, or 95.72 U.S. cents. Investors were also trying to gauge the time-frame for monetary-policy changes south of the border after U.S. Federal Reserve minutes released Wednesday showed officials felt that stimulus could be scaled back in the next few months if the economy improves enough. Markets are trying to position for whether the Fed will begin to taper its purchases at its next meeting in December, or hold off until 2014. The loonie slipped to a session low shortly after data showed the number of Americans filing for new unemployment benefit claims fell more than expected last week, suggesting there was some strengthening of conditions in the U.S. labor market, which is closely watched by the Fed. "Yesterday's minutes tell us that tapering is at least an option in December, you'll need to see better data before then," said Reitzes. The Canadian dollar is seen benefiting from the Fed waiting longer to slow its quantitative easing as that would likely increase investors' risk appetite and weigh on the U.S. dollar. Canadian bond prices were mixed across the maturity curve, with the two-year bond up 5-1/2 Canadian cents to yield 1.122 percent, while the benchmark 10-year bond was down 14 Canadian cents to yield 2.653 percent.